Post Source: Dawn – By Dilawar Hussain
KARACHI: Fertiliser companies have decided to raise prices by Rs60 to 75 per bag. A 50-kg bag of urea – the most commonly used fertiliser, would now cost Rs840 to 855. Companies in the business of producing and marketing urea announced on Saturday that the decision to increase retail prices was taken in order to mitigate the impact of gas curtailment to all the fertiliser plants. The government is stated to have curtailed gas supplies to various sectors and re-directed those to power plants in an effort to grapple with the problem of power shortage.
At a ‘Security Analysts briefing’ on Friday, the management of Engro Fertilisers Ltd presented the case. “Current curtailment of gas being faced by Engro is 7 per cent,” the company officials told analysts.
They noted that in response to the gas curtailment, Engro had decided to increase the price of urea by Rs75 per bag to Rs855. “This increase is based on current curtailment and will be revised further if curtailment level is increased,” the Engro officials pointed out but added: “Price will be adjusted once normal gas supply is resumed”.
Engro informed the analysts that gas to all fertiliser plants would be curtailed and elaborated that the SSGC/SNGPL network-based plants faced a 20 per cent cut, while the Mari network-based plants would see gas curtailment of approximately 12 per cent.
“As per current communication, the cut will continue until the hydel power situation improves in the country,” Engro said. The company officials observed that gas curtailment to FFC and Engro was lower because of three reasons: The gas was not of pipeline quality and had lower heating value. The network was not connected with the SSGC/SNGPL grid and third, only limited volume of gas could be diverted to Guddu Power Station.
“The gas curtailment will result in Engro and FFC plants operating at low load, due to lower volume of urea produced and lower plant efficiency due to low load operation,” the company said.
Local prices to be lower than imported urea:
The officials at the fertiliser company pointed out to the analysts that in spite of increase in local prices of urea, farmers would continue to receive urea at prices well below the international rates.
The company provided the break-up of costs: Spot international urea price (C&F) $300 per ton; landed cost of imported urea Rs1,520 per bag and price of Engro urea Rs855 per bag. “Total price benefit to farmer is Rs665 per bag, while total feed gas subsidy (industry average) stands at Rs375 per bag,” Engro officials told the analysts. The company’s own contribution was Rs290 per bag.
As a result of the gas cut, the country would face a further shortage of about 75KT of urea per month. The shortage would need to be bridged through imports, costing $22 million on C&F basis per month. All in all, the government would have to subsidise the imported urea, incurring an additional expenditure of about Rs1 billion per month.
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