Urea plants' closure to result in 0.96m tons of output loss: ministry

27th August, 2012: The Ministry of Industries has reportedly informed the Economic Coordination Committee (ECC) of the Cabinet that suspension of gas supply to five urea plants would result in loss of 966,000 tons production in four months and the country may face a shortage of urea during Kharif season, it was learnt. The issue of fertiliser availability for Kharif 2012 was discussed during the ECC after the Ministry of Industries moved a summary for import of urea, arguing that it was apprised by the Petroleum Ministry that 5 out of 10 urea plants had been shut because of suspension of gas supply. There is no hope of gas restoration to these plants in the near future and subsequently urea shortage would be met through imports, maintained high ups of Ministry of Industries. The Ministry also informed the meeting monthly urea production by four plants on SNGPL system is 207,000 tons provided they get 100 percent gas supply whereas four month closure would result in 814,000 tons less fertiliser production. The ECC was informed that one urea plant on SNGPL system produce 38,000 tons urea if it is provided 100 percent gas supply. The suspension of gas supply for four month would result in loss of 152,000 tons. The Ministry said that five plants, four on SNGPL and one on SSGCL system, would be facing curtailment of gas for four months as a result of gas diversion to the power sector. The meeting was informed that four plants that had been shut down on SNGPL system included Engro Fertiliser Limited with monthly production capacity of 110,000 tons, Pak Arab fertiliser 9,000 tons, Agritech Limited 39,000 tons per month and Dawood Hercules 51,000 tons per month. Sources said that Ministry of Industries had convened a meeting of all stakeholders on June 21, 2012 and two days after that meeting it was informed by the Ministry petroleum that half of urea plants had been shut down, consequently urea shortage would be met through imports. The Ministry informed the ECC that taking into account SNGPL plants total closure will reduce the urea stock to 443,000 tons in the first week of November 2012. Therefore, prudence demands that 600,000 tons of urea should be imported to maintain strategic reserves of around 500,000 tons immediately to discourage speculation, hoarding and black marketing. The subsidy on imported urea is always meant to bring the commodity within reach of small farmers, ensuring its affordability. However, subsidy on imported urea does not have desired effect as price of imported urea remains beyond the reach of small farmers as was evident from 20 percent less urea consumption in May this year compared to May last year. The Ministry maintained that in case imported urea price is kept at par with domestic urea price, there is no need for the government to spend scarce foreign exchange. Market forces may meet urea gaps increasing the rate of this agriculture input. The ECC allowed import of 300,000 tons urea. However, the proposal that price of imported urea be reduced to Rs 1,450 from Rs 1,600 per 50 kg bag to facilitate the growers was not approved.