MoI&P Seeks Uninterrupted Gas Supply To SNGPL-based Fertilizer Plants

A decision to supply gas to fertiliser plants without a subsidy was approved by the Cabinet and communicated to the Petroleum Division on March 20, 2023.

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The Ministry of Industries and Production (MoI&P) has proposed the import of 0.2 million tonnes of urea on a G2G basis and uninterrupted gas supply to SNGPL-based urea fertilizer plants until December 2023.

To meet the demand for urea fertiliser during Kharif Season 2023, MoI&P has submitted a summary to the ECC for the operations of fertilizer plants based on SNGPL. The Ministry of National Food Security and Research’s (MoNFS&R) recommendations served as the basis for this summary.

In order to close the supply-demand gap for urea fertiliser for the 2023 Kharif season, which runs from March 15 to May 31, the ECC ordered the Petroleum Division to start supplying domestic gas to the Fatima Fertilizer (Sheikhupura) and Agritech (Mianwali) plants as soon as possible.

A decision to supply gas to fertiliser plants without a subsidy was approved by the Cabinet and communicated to the Petroleum Division on March 20, 2023. On March 24, 2023, gas service was restored to the plants, and between March 27 and 28, 2023, operations commenced.

Due to higher urea fertiliser off-take in March-23 by 86,000 MT and production loss of 22,000 MT by Fauji Fertilizer Bin Qasim Limited (FFBL) as a result of gas pressure issues, MoNFS&R revised the annual off-take estimates for urea fertiliser.

The ministry estimates that if both SNGPL-based plants are shut down by May 31, 2023, there will be a need for 800,000 MT of imports. Furthermore, in a letter dated April 10, 2023 from M/o Industries and Production, it was requested that M/o NES&R reconfirm the updated off-take estimates. In a letter dated April 11, 2023, MoNFS&R expressed support for their efforts.

In order to review the situation, the Fertilizer Review Committee (FRC) met on April 6, 2023, and following thorough discussion, made the following recommendations:

(i) The FRC approved the MoNFS&R proposal for the import of 200,000 MT of urea fertiliser by May 15, 2023;

(ii) Fatima Fertilizer’s (Sheikhupura Plant) and Agritech’s uninterrupted gas supplies beyond May 31 until December 2023; and

(iii) Petroleum Division’s responsibility to ensure that gas pressure to all fertiliser plants may be maintained at the maximum for the best production of urea fertiliser.

The Ministry of Industries and Production has suggested the following in light of the FRC’s recommendations:

(i) SNGPL-based plants Fatima Fertilizer (Sheikhupura) and Agritech may be permitted to continue operating past May 31 until December 31, 2023; and (ii) TCP may be permitted to begin the process for importing 200,000 MT of urea via a global open tender and G2G basis.

On receipt of offers, Ministry of Industries and Production will place the matter before ECC for the final approval. The sources said that in line with the proposal of MoI&P, Ministry of Commerce has proposed the following:

(i) TCP may be allowed to invoke Rule 5 of PPRA for G2G procurement and be granted exemptions from Rules 8,9,13,35,38 and 40 of PPRA for doing international tenders;

(ii) TCP may be allowed to land the whole quantity of urea till end June 2023;

(iii) NFML be declared as the recipient agency;

(iv) Finance Division be advised to allocate Cash Credit Limit (CCL) to TCP for urea procurement;

(v) MoI&P should make arrangements for providing Technical Supplementary Grant(TSG) equivalent to total procurement done by TCP in order to repay the loan and avoid accumulation of mark-up OR

(vi) Finance Division to allocate amount for federal share already worked out by TCP for the CFY 2023-24 in the demand of Ministry of Commerce for avoiding accumulation of mark-up.

For the best urea fertiliser production, the Petroleum Division makes sure that gas pressure to fertiliser plants is kept at its highest level.

The proposal has received support from the Ministry of National Food Security and Research, who added that imported urea should arrive in the nation by mid-May 2023. Up until August 31, 2023, the Ministry of Energy’s Power Division has granted permission to divert natural gas from the Guddu Thermal Power Station.

The Finance Division has endorsed the proposal, with the condition that system gas is supplied without federal government subsidies. MoI&P will consult with provincial governments and obtain their written consent to lift imported gas on a full cost basis.

The amount of urea imported should be restricted to the amount decided upon by the Provincial Governments.

The MoI&P will call a meeting with provincial governments and federal government stakeholders to address the concern raised by the Finance Division. The results of the meeting will be communicated to the ECC.

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