Govt to end discounted tariff for fertiliser firms

The government is set to end concessionary gas tariff for Fatima and Engro Fertilizer plants by the middle of the year.

The two fertiliser companies are currently availing a concessionary gas tariff of $0.70 per mmbtu. However, the concessionary period for Fatima Fertilizer is set to expire in July 2021 whereas Engro Fertilizer’s concessionary period is coming to an end by June 2021.

According to a report by the Express Tribune, the government and Engro Fertilizer are in dispute over expiration of gas supply agreement at discounted rates.

Once the concessionary period comes to an end for both the plants, the government would review the gas tariff for the entire fertiliser industry consuming indigenous gas and the existing distortions would be removed for creating a level playing field for all players, the Petroleum Division had informed the Economic Coordination Committee (ECC) in a recent meeting.

The plants of both fertiliser companies were selling the fertiliser to farmers at the same higher rate being charged by other plants despite the fact that they had been receiving cheaper gas.
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Other fertiliser plants had been paying Rs302 per mmbtu for gas to be used as feedstock and Rs1,023 per mmbtu for fuel stock. However, new fertiliser plants of Fatima and Engro had been paying Rs112 per mmbtu for gas to be used as feedstock.

These new fertiliser plants had not even booked the Gas infrastructure Development Cess (GIDC). Hence, these plants emerged as major beneficiaries as they paid less for gas and did not pay GIDC.

Meanwhile, the economic decision making body approved extension in gas supply to Fauji Fertilizer Bin Qasim (FFBQL) for the next five years. However, the supply was committed on an available basis, which means there was no guaranteed supply.

 

 

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