Karachi, March 7, 2024 – Fertilizer manufacturers in Pakistan are urging the government to create a level playing field by eliminating discriminatory gas pricing, a move they believe will foster new investments, enhance efficiency, and guarantee ample urea availability for the country’s farmers.
Ali Rathore, Chief Financial Officer of Engro Fertilizers, addressed participants in a media workshop, shedding light on the pivotal role of a robust indigenous fertilizer industry, its current challenges, opportunities, and recent government initiatives aimed at reforming the sector.
Rathore acknowledged the government’s recent step in the right direction by removing subsidies for fertilizer manufacturers on Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) networks, representing 60% of all fertilizer manufacturing capacity. However, he emphasized that discriminatory gas pricing persisted, with manufacturers on the Mari network (FFC and Fatima) still receiving gas at a subsidized rate of PKR 580/mmbtu, while prices for SSGC and SNGPL had surged by approximately 200 percent.
This discrepancy in gas pricing has resulted in varying urea prices, with FFBL, Engro Fertilizers, and Fauji Fertilizer Company Ltd offering urea at PKR 5,489, PKR 4,649, and PKR 3,767 per bag, respectively. Rathore noted that this price gap has provided an opportunity for middlemen to profit by an estimated PKR 80 – 100 billion. Advocating for a uniform gas price, Rathore asserted that it would create a level playing field for all manufacturers, stabilize urea prices, and prevent market distortions.
Highlighting the potential financial benefits, Rathore proposed that “Complete removal of subsidies and unification of gas prices for the entire industry can help the Government earn an additional PKR 80 – 100 billion, which can then be used for targeted initiatives that uplift the farmers.” He commended the government’s commitment to ongoing reforms in the fertilizer industry and direct subsidies for farmers.
The media workshop underscored the need for long-term policies for the domestic fertilizer industry to support sustained economic growth and the objectives of the Green Initiative Pakistan. While locally produced urea remains around 30 percent cheaper than imported urea, Rathore emphasized that consistent and homogeneous gas pricing policies are essential to encourage investment and capacity expansion in the industry.
Despite Pakistan having the fifth-highest urea consumption globally, Rathore pointed out a lack of investment in capacity growth, attributing it to anomalies in gas pricing. He stressed that resolving these issues would encourage manufacturers to undertake significant investments in plant modernization and expansion, thereby improving efficiency and optimal gas utilization.
Simultaneously, major fertilizer manufacturers, including Engro Fertilizers, are investing substantially in the Gas Pressure Enhancement Facilities (PEF) project to sustain domestic urea production levels and secure Pakistan’s food security. Engro Fertilizers’ expected capital expenditure for this project exceeds USD 100 million, showcasing the industry’s commitment to agricultural sustainability and national development.
