ECC asked to allow import of fertiliser
ISLAMABAD, Aug 6: The Ministry of Industries, led by Deputy Prime Minister Pervaiz Elahi, asked the Economic Coordination Committee on Monday to allow import of at least 600,000 tons of fertiliser from Aug 7 to ensure its availability and stabilise prices, amid an ongoing gas crisis, which is expected to worsen in the coming days.
But this has not gone well with the fertiliser industry on fears of causing a double jeopardy for domestic plants.
Many fertiliser companies already face threat of closure due to financial meltdowns, especially the plants on the transmission system of Sui Northern Gas Pipelines Ltd (SNGPL), because of lack of gas availability as it has been diverted to the power sector.
The ECC led by Finance Minister Dr Abdul Hafeez Shaikh downgraded fertiliser on the priority list to get gas after domestic consumers and the power sector.
Agritech Fertiliser has already served notices to its staff for lay offs, while a couple of other plants were also considering similar options according to informed sources.
The newest plant, Engro, is also in the process of re-profiling its $700 million loan it had arranged for its $1.1 billion Enven plant, as it would delay payments against the principal loan for at least two years and give only interest due to its financial limitations.
Fertiliser Manufacturers Advisory Council of Pakistan, the representative body of fertiliser sector, led by a former federal secretary Shahab Khawaja–questioned the need for urea imports beyond 80,000 tons before the Rabi season, who offered to sell 400,000 tons of current stocks to the government, instead of starting imports.
“We feel that current stocks situation of Urea may not warrant immediate imports of such large quantities”, said Mr Khawaja in an emergency letter to deputy prime minister and members of the ECC.
It called for a meeting of fertilizer review committee which would comprise of industry and government representatives — to discuss the supply and demand situation for 2012, subsequent import requirements and review the Rabi 2012-13 supply demand by end Sep once the actual off-takes of Kharif 2012 are concluded.
The industry believed that the government should adopt two rotations at SNGPL system where at least two fertilizer plants should be provided gas on rotation basis.
The fertiliser council argued that Pakistan would require 80,000 tons of additional urea imports till year end to keep a buffer stock of 100,000 tons at the close of year.
Moreover, this import was also required by November-December 2012 and no further import was needed till then as sufficient stock was available in the country for the preceding months.
The import of this additional 80,000 tons will need $39 million of foreign exchange at the average import price of Trading Corporation of Pakistan during the first half of 2012 and Rs2 Billion as subsidy on imports making this option the most economical for the country, the council argued.
Urea demand has been witnessing a 5 per cent decrease annually since 2009, which is expected to intensify this year due to the current urea prices coupled with low cotton prices and water shortages in the cotton belt.
Urea stocks in the country at the end of Jun 2012 stood at around 400,000 tons with a major portion lying with the urea manufacturers.
If the government has to import more than the proposed 80,000 tons to keep additional buffer stocks then the fertilizer industry would offer to sell urea to the government at the existing prices.
This would enable the government to keep buffer stocks to stabilise market prices and also avoid importing additional quantities.
Consequently, for purchase of each 100,000 tons from domestic industry, the government can save $48 million and Rs2 billion in subsidies.
The ECC is scheduled to meet on Tuesday.