FMPAC seeks judicious distribution of gas

Fertilizer Manufacturers Pakistan Advisory Council (FMPAC) has demanded rational distribution of natural gas from the government. The statement said this was essential to keep all sectors of the economy running in order to generate the much-needed economic activities and subsequent generation of revenues for the national exchequer. It added that closing down a few industries or giving priority to one sector over other will not resolve the economic issues, hence, the best way should be to analyse as which sector is creating maximum value addition with the natural resources, especially gas. Shahab Khawaja, executive director of FMPAC, said that the fertiliser sector is not using gas to run its plants but it offered maximum value addition by converting raw gas into precious urea grains. Due to worst-ever gas curtailment to the fertiliser sector during the last three years, the country had spent $1.5 billion and also paid a subsidy of around Rs80 billion on the imports of 3.4 million tons during 2010-12, he said. “Pakistan cannot afford to spend hundreds of millions of dollars on urea import and we are hopeful that the new government will ensure judicious distribution of gas among all the sectors of the economy,�? he said. The cost of imported urea comes to around $23 per mmBtu of gas. Instead, the import of furnace oil and liquefied petroleum gas will be 30 to 50 percent less expensive than the imported urea on mmBtu basis, he said. Fertiliser plants have invested $2.3 billion during the last four years to make Pakistan self-sufficient in urea production. With consistent gas supply to these plants, the government can ensure timely availability of this key farm input to farmers at reduced cost, he said, adding that this will also help the government reduce its fiscal deficit, as well as subsidy. Khawaja said that all other industries have alternative fuel options except the fertiliser sector that uses gas as a raw material to produce key farm input, urea.He warned that if gas remained discontinued to the fertiliser plants, Pakistan will have to import one million tons of urea, which can cost the national exchequer $450 million and a subsidy of Rs21 billion to match the imported urea price to the domestic cost. If an 18 to 36 month moving average is considered, in which Pakistan has imported over 3.4 million tons of urea by draining approximately $1.5 billion, as well as paid over Rs 80 billion in subsidy, then the differential between local and international prices is more than Rs1,000 per 50kg bag, he said. Khawaja said that based on the current feed and fuel gas prices, gas subsidy per bag of urea works out to be Rs 228 per bag. In essence, if the government’s subsidy on gas price was taken away, urea prices will only increase by Rs 228 per bag, he said. The difference between domestic and international urea prices is more than Rs 1,000 per bag, therefore, not only is the fertiliser industry passing on feed gas subsidy to the farmers, it is also passing on a much larger benefit voluntarily in addition to paying taxes to government.In total, farmers received a benefit of around Rs365 billion over the last three years (around Rs 500 billion over last five years) in the form of lower domestic urea prices, he added.