Agritech Ltd (Pak-American Fertilizer) Gas Restoration On Nominal Price

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Agritech Ltd Employees has pleaded with Prime Minister Nasirul Mulk and the Ministry of Petroleum and Natural Resources to resolve the matter of continuous gas cuts afflicting the fertiliser industry.

Fertiliser makers expressed serious concerns over the closure of urea manufacturing plants due to lack of gas supply.

The fertiliser industry is in peril due to the inconsistent policies of successive governments, a spokesman of Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) said. The industry urged the Prime Minister to save the fertiliser plants from collapse as the plants could not completely utilise more than 100,000 tons of production capacity due to non-availability of gas at applicable and affordable rates.

Shortage of local gas and high prices of imported liquefied natural gas has created major challenges for the industry, which is among the biggest revenue contributors to national exchequer. “The cold response by the government has resulted in pushing the industry to permanent shutdown and first casualty has been Agritech – the first state-of-the-art fertiliser plant in the national history,” the spokesman added.

Agritech Limited has served lay-off notices to its manpower as the company found the business unviable to sustain after shortage in supply of gas, which is the primary raw material for urea production.

Supply of feed gas has not yet been restored after the winter curtailment and the present option offered by Sui Northern Gas Pipelines Limited (SNGPL) to the company is the use of economically-unviable re-gasified liquefied natural gas (RLNG) or RLNG-local gas mix instead of extending the local gas supply agreement at notified rates.

The company’s management found that it was not be feasible to continue the present plant operations in the absence of economically-viable feed gas supply with full employee strength at the urea manufacturing facility. The management has so far failed in its efforts on all the initiatives to get supply of gas at the affordable rates. The company is, therefore, forced to permanently retrench nearly all its workers, labourers and management staff at the urea manufacturing site with their terminal and separation dues pending final approval. The prolonged suspension of feed gas and no urea production due to feed gas absence has put further strains on the financial ability of the company to pay the salaries and wages to its employees. The plant can, however, immediately resume operations after immediate resumption of gas supply.

The spokesman said fertiliser plants, such as Pakarab Fertilizers, DH Fertilizer and Agritech, which are working with SNGPL, have experienced frequent shutdowns due to unavailability of gas or tariffs issues. These plants have not operated at all so far during 2018 and also remained out of operation for almost eight months during 2017, causing financial losses to the companies. RLNG is not financially-viable for urea production in particular under the prevailing price mechanism. The minimum essential affordability level of gas should enable the manufacturers to keep the capital-intensive plants in operation, retain skilled manpower and maintain their presence in the market. The FMPAC’s spokesman said fertiliser industry is still capable of meeting the projected demand of urea in the country. Therefore, there is no need to consider any import option. National Fertilizer Corporation Limited’s import proposal would require huge outflow of foreign currency in addition to subsidy, which would not be considered prudent in view of increasing international prices – with approximate landed cost of Rs2, 000 per bag.

The spokesman said the underutilised national production capacity of around 1.1 million tons a year can be operational through provision of sustained supply of natural gas at applicable and affordable rates, which would also address the apprehensions about any future demand/supply gap, besides revenue earnings impact for the government.

The cumulative inventory of urea in Pakistan reached 1.7 million tons in May 2017, giving Pakistan a great opportunity to export surplus quantities to reduce the excessive inventory burden and earn precious foreign exchange to stabilise the national economy. “Hence, the government should recognise the performance of this industry and facilitate the stakeholders with ample gas supply and timely payment of subsidy claims,” the spokesman said. “This way the fertiliser producers will be able to ensure better soil-nutrition and continue passing on the low-cost benefits to the poor farmers in the agricultural sector – the backbone of Pakistan’s economy.”