Pakistan Fertilizer plants operating on the Sui Northern Gas Pipelines Limited (SNGPL) network received almost half of the gas in year 2012 against what they received in the year 2011 resulting in lower production and increase in cost of fertilizer for the growers.
Sources in the fertilizer industry sector said that since the start of the gas shortage in 2010, the production at all the four fertilizer plants operating on SNGPL network ie Pakarab Fertilizers Limited, Agritech Limited, Engro Fertilizer Limited and Dawood Hercules were subjected to frequent and unannounced shutdowns.
In 2011, the plants operating on SNGPL network were supplied: Pakarab Fertilizers Limited a total of 8,278 mmcf, Dawood Hercules-6,513 mmcf, Agritech-3,142 mmcf and Engro received 12,643 mmcf. In 2012, with a view to improve the situation, an agreement was signed with SNGPL, with an understanding that fertilizer plants would receive gas on a fifteen days rotation, however as the situation worsened even this agreement was not followed. In 2012, the total gas received so far is (January-November); Engro-6,490 mmcf, Pakarab-4,941 mmcf, Dawood Hercules- 2,788 mmcf and Agri-tech-2,655 mmcf. This is almost half of what was received in 2011. During the second half of 2012 gas supply to plants was as follows; Agritech 30 days, Pakarab 30 days, Dawood Hercules 15 days and Engro 0 days. Another important fact to note is that among the plants operating on the SNGPL network, Engro is the single largest consumer and requires 100 mmcfd, which is almost as much as the cumulative requirement of the other three which is 135 mmcfd.
Pakarab Fertilizers Limited, Agritech and Dawood Hercules have suffered huge losses owing to gas curtailments during the current year. Being solely dependent on SNGPL network for its feedstock gas, Pakarab alone has not produced for over 250 days out of a total of 325 days of 2012.
It is important to note that, none of the fertilizer plants were operating for the promised period as laid down in the agreement with SNGPL. Being an agriculture country, the importance of Fertilizers need cannot be overstated. The question arises that given the significance of the sector, why the priority of the fertilizer sector which was at number two behind domestic users under the gas policy of 2005, has been now relegated to number four behind power and industry.
The total number of people whose livelihood is dependent on these plants is over 10,000, in addition to them, thousands more connected to the business also have their incomes at stake. This ongoing gas curtailment is taking heavy toll on the agriculture sector and also on the economy as a whole. The increasing prices of Urea due to gas curtailments, levy of General Sales Tax and imposition of Infrastructure Development Cess has led to a significant increase in the input costs burdening the farmer and threatening food security as urea consumption continues to decline in the country. In the last 5 years, the fertilizer industry has invested over USD 5 billion which is among the highest by any sector in the country. If such projects continue to suffer, future foreign investments will also be at risk.