AGRICULTURE PRIMARY VICTIM OF GAS SHORTAGE
Aug 22 - 28, 2011
High prices and shortage of urea of over one million tons will not only render billions of direct losses to the farmers, but also unroll adverse implications for the economy as a whole, if the government continues to show laxity in giving befitting response to the situation.
It is painful to know that the gas shortage after hitting the power generation and CNG sector is now dealing a sever blow to the industrial consumers. The gas crisis is heading towards the agriculture sector, which is feared to prove disastrous to the economy if not handled carefully.
Currently, the national urea production is estimated at around five million tons as against the demand or consumption of six million tons a year, creating shortfall and thereby affecting price structure. Demand-supply deficit pushes up cost of inputs so vital for agriculture sector, the mainstay of the economy.
Tahir Jawaid, Vice President HR and Public Affairs, Engro Corporation Limited while talking to PAGE pointed out that curtailment of gas supply to fertilizer plants was started from April 2010 when the energy summit decided to curtail 12 per cent gas supply to fertilizer plants from Mari field and 20 percent from SNGPL/SSGC network for three months.
This decision for curtailing gas supply was extended for yet another three months in July 2010 while the curtailed gas supply continued by the end of 2010 resulting in a total shutdown of gas based urea plants for 45 days.
It may be recalled that the economic coordination committee (ECC) made a decision to operate fertilizer plants on SNGPL at 80 percent load on continuous basis but decision could not be implemented.
The SNGPL announced that it would operate four fertilizer plants on Rota basis of 15 days which was not feasible technically and economically.
It may be mentioned that at the moment the total installed capacity of urea in the country is estimated at 6.9 million tons per annum, which is said to entitle the urea production sixth largest in the world.
It is a funny situation that despite having capacity to produce surplus urea, we are facing a shortage of over one million tons. In some cases urea is sold at highly inflated price in black market by the middlemen.
Today, the agriculture sector is facing acute fertilizer shortage due to continuing gas outages and gas supply curtailment to fertilizer manufacturing plants throughout the country, said Tahir Jawaid.
One of the severe impacts of energy crisis is abnormal price hike of urea which increased from Rs800 per bag to Rs1800 a bag since January 2010.
It is amazing or painful to note that the price inflation is unprecedented in Pakistan mainly because of energy crisis, yet our financial regulators are focusing only on tightening of the monetary policy and increasing interest rates instead of taking serious corrective fiscal as well as administrative measures to control artificial price movements.
Over the last 32 years, the price of urea remained at Rs750 a bag while in a short span of 1.5 year urea prices skyrocketed to Rs1000 a bag. The state of affairs indicates that the price movement is neglected or the people at the helm of affairs have no knowledge about price mechanism and its management.
LIGHT AT THE END OF THE TUNNEL
As the famous saying goes every dark cloud has a silver lining, the recent development on the much delayed project of Iran-Pakistan gas pipeline project has kindled a light of hope to resolve the most critical issue of energy shortage. Yet, there's many a slip twixt cup and lip.
The Iran-Pakistan gas pipeline project has attracted a number of global investors and technical experts eyeing to participate in this lucrative energy project. At the moment, the energy problem is the most crucial issue next to the security problems in Pakistan.
In this respect, Abu Dhabi state-run company International Petroleum Investment, and China National Petroleum Corp. (CNPC) have all shown interest in the project to construct an Iran-Pakistan gas pipeline, said informed sources.
Russian gas-export monopoly Gazprom may fund and help build the 780-kilometer IP pipeline. Pakistan plans to borrow $300 million from local banks to build a pipeline that will carry natural gas from Iran while local state-owned companies will provide about $210 million in equity for the $1.3 billion pipeline project.
Pakistan may approach foreign companies including OAO Gazprom, International Petroleum Investment Co. and China National Petroleum Corp. for the rest of the financing, it is learnt. Sources are of view that the local funding is crucial for the project because of the immense pressures on the western banks and international agencies to isolate Iran.
Acute fuel shortages persisting for quite a few years is forcing the government to ration gas supplies and cut power for as much as half a day in major cities.
It may be mentioned that under an accord signed in June 2010, Iran will provide about 21.5 million cubic meters of gas a day to Pakistan for 25 years. The deal can be extended by five years and volumes may rise to 30 million cubic meters a day. Pakistan's gas shortfall is forecast to reach 2.22 billion cubic feet a day in this fiscal year that began July 1, according to government data.
Last year, 53 percent of Pakistan's energy came from natural gas, 30 percent from oil and the rest from coal, nuclear and hydropower, according to data from BP Plc. Pakistan produced 39.5 billion cubic meters of gas in 2010, or 3.8 billion cubic ft a day.
The Iran-Pakistan gas pipeline is a delayed project lingering on for over a decade due to the pressures from west especially the US. This badly needed IP energy alliance in view of ever-deteriorating energy situation will not come to fruition unless normalcy returns in US-Iran relationship.