Feb 13 - 19, 20

Nutrient deficiency of lands is one of the major reasons of low yields in Pakistan. This problem can be overcome by applying appropriate dosage of different types of chemical fertilizers. Therefore, it is imperative for the government to ensure availability of fertilizers at affordable prices. It is also necessary to keep in mind that application of excessive quantities of fertilizers could prove counterproductive and at times fatal especially when it contaminates subsoil water.

Over the years, the government has been supporting fertilizer manufacturers by supplying gas at subsidized rate. Following this policy has enabled the country to achieve self-sufficiency in urea production. Annual production capacity has increased to about seven million tons from 0.178 million tons in mid sixties. Besides urea, DAP and other types of fertilizers are also produced in the country.

As a result of supply of gas at subsidized price, cost of locally produced urea has remained substantially lower than the imported one.

International prices of urea often are highly volatile and move between $350 to $650 per ton. Therefore, in case of any shortfall, the government has to pay huge subsidy to minimize the adverse impact on farmers. The government with the consent of fertilizer industry has successfully reduced the difference between tariffs charged to fertilizer and other industries. However, still there is pressure to completely eliminate the difference.

Experts are of the view that bulk of the fertilizer manufacturing capacity is based on low quality gas produced at Mari field. Therefore, it cannot be sold at the price of pipeline quality gas.

The Fertilizer Policy 2001 dedicated Mari field to fertilizer industry. However, some of the thermal power plants operating in the public sector are still getting gas from this field. It would have been most appropriate, had the government stopped supply of gas to power plants from Mari field and encouraged gas supply to the fertilizer units from this field.

Engro's expansion plant capable of producing 1.3 million tons urea per annum was allocated gas from SNGPL network. The adverse impact of this bad decision is that since commencement of commercial production this unit has to be closed down intermittently. There has also been curtailment of supply for the plants getting gas from Mari field.

Closure of plants getting gas from SNGPL has been a routine but now these outages exceed 90 days. As a result, the country despite having capacity to produce 1.2 million tons exportable surplus urea has to import around the same quantity.

It is necessary to point out that the pilferage from SNGPL network is around the same quantity of gas supplied to fertilizer units linked to its network.

An irony of fate is that instead of containing pilferage and leakage the government has chosen to curtail supply of gas to fertilizer units. Another reason for the curtailment of gas supply to fertilizer industry is diversion of gas to thermal power plants. The common perception is that running power plants on gas can improve cash flow of electric utilities. However, experts say that electric utilities mainly suffer due to massive theft and nonpayment of bills by the offices of federal and provincial governments. Therefore, unless these two problems are overcome cash flow of electric utilities cannot be improved.

Experts are also of the opinion that power plants can be run on alternate fuels but fertilizer plants cannot. As a result of dismal capacity utilization, manufacturers are forced to increase price of urea. Some of the quarters approved this policy on the basis that it will help in bridging the difference in the cost of locally produced and imported urea. However, they completely fail in understanding that hike in fertilizer price does not allow farmers to apply right dosage of different types of fertilizers. This policy will not allow Pakistan to attain food security.

Some of the experts also say that since price of gas is linked with price of crude oil, it is necessary to make appropriate adjustment in tariff being charged from fertilizer industry. However, there is a consensus that instead of curtailing supply and raising gas tariff, SNGPL and SSGC should try to contain leakage and theft.

They also say that the government must stop supplying gas to power plants from Mari gas field immediately.

There is a suggestion to run fertilizer plants on LNG to overcome gas shortage. However, experts are of the opinion that using LNG in fertilizer plants is highly uneconomical. Some of the experts are of the opinion that gas crisis has been created deliberately to pave the way for the import of LNG. They say that if ongoing litigations of the mega gas fields are resolved the country can get gas equivalent to the present level of shortage.

To make the things further even more complicated, some of the experts are suggesting production of gas from Thar coal.

While most of the developed countries use coal for power generation, developing countries are restricted to do so at the pretext of environment pollution.

Use of gas for power generation is like cooking food on burning dollars. Since the country faces shortage of gas, all the power plants must be run on furnace oil. Meantime efforts should be made to construct run of the river hydropower plants and granting sugar mills status of IPPs. This will automatically reduce consumption of imported oil. However, such decision needs political commitment and relinquishment of selfish motives. Policy planners must come out of the shadow of oil lobby. The sooner Pakistan can lessen dependence on oil, the better it will be.