Engro Fertilizers welcomes gas tariff revision as a step in the right direction

In a recent move by the government to adjust the subsidies for the fertilizer sector, Engro Fertilizers has expressed its approval of the revised gas tariff policy.

This revision sees the removal of subsidies for fertilizer manufacturers using gas from the SNGPL network, affecting 60% of the industry's production capacity.

The new policy raises the feedstock gas price from Rs580 per million British thermal units (mmbtu) to Rs1,597 per mmbtu, marking a significant increase in production costs for the affected manufacturers.

This decision is viewed as an important step towards addressing Pakistan's ongoing financial challenges.

In a press release issued by Engro Fertilizers, it is stated that ”Pakistan’s current financial position is distressed, it is in a debt crisis, with the debt-to-GDP ratio already above 70 percent and more than $27 billion of foreign debt to be repaid by November 2024. The country cannot afford further fiscal pressures or half measures that do not go all the way in solving Pakistan’s problems. The dependence on government subsidies must end, for Pakistan to really move forward and break away from the vicious cycle of debt.”

Engro Fertilizers has highlighted the partial nature of this policy change, noting that the remaining 40% of the sector's capacity, which relies on gas from the Mari network, continues to benefit from the previous subsidized rate of Rs580 per mmbtu.

The company argues that a complete removal of subsidies across the entire fertilizer sector is essential for the financial health and autonomy of the country.

“With this complete removal, the government is expected to collect Rs50 billion, which can then be used for targeted agricultural projects and initiatives that generate economic activity and growth in the country.” the company says further.

Engro Fertilizers suggests that this policy shift offers an opportunity for the sector to demonstrate global competitiveness without reliance on government subsidies, potentially setting a precedent for efficiency and investment in the industry.

Furthermore, the company sees this as a chance for the fertilizer industry to serve as an example for other sectors, advocating for a broader reassessment of subsidy policies across the economy.

Engro Fertilizers urges the government to fully eliminate subsidies for the fertilizer sector, aiming to alleviate the national debt burden, foster efficiency, attract investments, and contribute to a stronger future for Pakistan.