As fertiliser manufacturers continue to exploit farmers by making unjustified price hikes, the government is striving to devise a viable gas pricing plan for the fertiliser sector.
The government has come to know that fertiliser producers had not passed on the benefit of subsidised gas to farmers.
In a recent meeting, the Economic Coordination Committee (ECC) stressed that a holistic approach should be adopted to stabilise fertiliser prices by giving relevant ministries ample time for drawing up a viable gas pricing plan for the fertiliser industry.
According to officials, the fertiliser manufacturers had received billions of rupees from farmers on account of gas infrastructure development cess but they did not deposit the collection in the national exchequer. During discussions, the Petroleum Division explained that the provision of gas to fertiliser plants at prices notified by the Oil and Gas Regulatory Authority (Ogra) either would put a price differential burden on domestic consumers or would require a subsidy from the Finance Division.
The Ministry of Industries and Production highlighted that subsidy benefits had not reached farmers owing to no corresponding reduction in urea prices. They called for eliminating distortions in gas pricing for the fertiliser sector.
Due to financial constraints, the Finance Division did not endorse the provision of further subsidy to bridge the price differential.
Read Fertiliser industry urges uniform gas tariff
The Ministry of Industries recalled that on March 27, 2024, the Fertiliser Review Committee had convened to assess the need for urea consumption in the Kharif sowing season of 2024. The committee recommended that the industries ministry should submit a summary for extending operations of SNGPL-linked fertiliser plants beyond March 31, 2024. It called on the Petroleum Division to ensure maximum gas pressure and supply of maximum volumes to Fauji Fertiliser Bin Qasim Limited for maintaining optimum production of urea and di-ammonium phosphate (DAP).
It recommended that the National Fertiliser Development Centre, which comes under the Ministry of National Food Security and Research, should finalise the requirement for urea import and present it to the fertiliser committee meeting in the second week of April.
Earlier, the ECC, through its decision dated February 7, 2024, approved the running of two SNGPL-linked fertiliser plants from January to March 2024 at the gas supply price of Rs1,239/mmBtu.
In this respect, it said, the price differential in relation to re-gasified liquefied natural gas would be treated as RLNG diversion to the domestic sector for recovery through the SNGPL’s revenue requirement determined by Ogra. This decision was ratified by the cabinet on February 15, 2024.
The Ministry of Industries submitted proposals, saying that SNGPL-based plants, ie, Fatima Fertiliser (Sheikhupura) and Agritech, may be allowed to remain functional beyond March 31, 2024 for six months till September 30, 2024 at the gas supply price notified by Ogra, which was Rs1,597/mmBtu (feed and fuel gas) while the price differential would be treated as RLNG diversion to the domestic sector for recovery through the SNGPL’s revenue requirement.
The ECC deferred its decision and directed the relevant secretaries to present a viable pricing plan. Furthermore, the ECC told the Petroleum Division to continue supplying gas to urea plants as per ongoing arrangements.
Published in The Express Tribune, May 14th, 2024.
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