ISLAMABAD: The federal cabinet has proposed introducing uniform gas prices for fertiliser manufacturers to eliminate alleged favoritism and market distortions. The move aims to ensure a level playing field as discrepancies in current gas tariffs have led to uneven profit margins among manufacturers.
At present, some urea manufacturers pay lower gas tariffs while others incur higher costs. Despite this, all companies sell fertilisers at uniform prices to farmers, allowing those with lower tariffs to generate higher profits.
During a recent cabinet meeting, members emphasized the need for equitable gas tariffs to avoid market imbalance and rectify prior faulty agreements with fertiliser producers. These agreements have reportedly enabled significant profits at the expense of farmers.
The Economic Coordination Committee (ECC), in its August 2024 meeting, directed uninterrupted gas supplies to Fatima Fertiliser and Agritech to avoid a production shortfall of 420,000 tons during the Rabi season. Importing urea to meet this gap would cost $169 million and require an additional subsidy of Rs22.45 billion.
The Petroleum Division proposed increasing gas tariffs for the two plants to Rs1,800 or Rs2,000 per mmBtu, potentially generating Rs466 million to Rs932 million in additional revenue monthly. However, plant management cited operational challenges with higher tariffs.
After deliberation, the cabinet resolved to maintain the current tariff of Rs1,597 per mmBtu for these plants until December 15, 2024, ensuring price stability for farmers. Gas supply to Fatima Fertiliser and Agritech will continue until March 31, 2025.
The cabinet instructed the Petroleum Division and the Ministry of Industries to negotiate with the fertiliser industry to establish a uniform gas price, ensuring market stability and protecting the interests of the agriculture sector.
Story by Zafar Bhutta
