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Closed Fertilizer plants resumed operation amid rising gas Prices

Islamabad: (Parliament Times) The gas supply to closed down fertilizer plants have started resumption, as Agritec located in the constituency of Prime Minister after almost an year. The production of Urea starts today. Fatima fert is also likely to resume production shortly, adding to the domestic production. The gesture of government especially the ministries of Industries and Production, and Finance and Petroleum is appreciated by all and sundry. Mr Abdur Razzaq Dawood; the Advisor to Prime Minister on Industries and Mr Asad Umer; the Finance Minister having realized the need for operationalization of under-utilized domestic production capacity have played the lead role in saving local industry, foreign exchange and subsidy element, in view of higher international prices. Shortage of local gas and high prices of imported LNG in the country has created major challenges for this sector – which is among the biggest revenue contributors to Pakistan’s exchequer. Furthermore, if the domestic production is not supported, the shortage of Urea may occur, forcing costly imports and volatility in prices. Gas to manufacturers on SNGPL has remained highly erratic, causing major disruptions and shut-downs in the production of these enterprises suffering heavy financial losses.
Pakistan’s fertilizer industry has the capacity to meet national demand, if the cost of production remained within the viable limits. It should be noted that world over gas is provided to the fertilizer sector at a much lower rate compared to what it is in Pakistan. It is $4.78 US dollar per MMBTU in Pakistan, while internationally it is between 2 to 3 dollars per MMBTU. The recent decision to increase the gas prices for fertilizer sector by 40-50 percent is going to result in increase in Urea price by Rs 128 per bag, as calculated by Ministry of Industries. The industry is already suffering on account of subsidy of Rs 20 Billion, withheld by the Govt. The profits have also dwindled to their lowest levels over the past six years regardless of record revenues achieved by major players. Therefore, any perception regarding windfall gains through price adjustments in the past is highly misplaced and unfounded.
Governments, around the world, have the responsibility to protect and favor their essential indigenous industries, to create more employment opportunities and reduce their imports bills. The government should work towards relief through adjustment in GIDC and other taxes to the fertilizer sector offering a competitive advantage vis-a-vis international market, thus supporting own farmers through affordable prices. Therefore, Pakistan should also formulate an ingenious tax regime to nurture its agriculture sector, while strengthening the supply of its basic inputs, like fertilizer.

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