Gas to fertilizer plants: Sanity should prevail

FOLLOWING THE persistent natural gas loadshedding especially to the fertilizer sector, the Ministry of Petroleum has reportedly proposed to the government to adjust investments by fertilizer plants for the development of transmission infrastructure against Gas Infrastructure Development Cess (GIDC) from the fertilizer industry under its long-term plan for gas supply to the fertilizer sector. Subsequently a dedicated transmission system (including compression and ancillary facilities) would be established in this regard by four fertilizer plants. According to estimates, the non-supply of gas to fertilizer plants would cause a loss of around 2.7 million tons less urea production which has to be otherwise arranged through imports at a landed cost of $1.3 billion (Rs 140 billion). The subsidy on the imported fertilizer on the required quantity would stand at Rs 61 billion to supply the same to farmers at domestic prices. The proposal suggests that these fertilizer plants will have to lay the pipeline for around 1000 kilometers with the cost of around $300-400 million. The rationale for the proposal was to allocate gas quantities/volumes from some alternate dedicated gas supply sources. If the gas supply is not restored, these plants would cease to operate and subsequently non-operation of plants for a prolonged period will result into forced closures thus causing defaults to the banking industry of nearly Rs 150 billion. In addition, the fertilizer industry closure will result in a loss of 15,000 direct and 50,000 indirect jobs and negatively affect the GDP by Rs 100 billion. Estimates reveal that only 202 MMCFD gas is needed to be supplied to these closed fertilizer plants for operating them at a reduced capacity under the long-term plan. The policy to stop gas to fertilizer industry needs to be reconsidered, as Pakistan is an agricultural country. It needs sustainable supply of fertilizer and cannot afford to import fertilizers in huge quantities. This could result in a hike in the cost of urea, rendering agricultural products uneconomical as farmers will be in no position to afford using urea in sufficient quantities for yield optimisation. As far as the gas supply to these plants at required quantity on regular basis even through the required pipeline is concerned, this idea looks squarely impracticable as this is quite possible that the government back out of its commitment on the gas supply factor in the wake of fast diminishing gas deposits. This looks a quite sane step, if the government of Pakistan shifts the financial allocation, that could be used to lay the proposed pipeline for apparently sustained gas supply to these fertilizer plants, to the laying of the gas pipeline to get natural gas from Iran. This would at least ensure the gas supply in a sustained way for a longer period.