Urea prices are projected to rise by at least Rs100 per bag as the government proceeds with a semi-annual gas tariff adjustment in alignment with its commitment to the International Monetary Fund (IMF).
This tariff adjustment, slated for February 2025, is intended to support revenue requirements for the Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Ltd (SNGPL), two of Pakistan’s primary gas suppliers.
According to a recent report by the IMF, the federal government has agreed to announce these revised gas tariff rates semi-annually to secure the necessary funding for the Sui companies.
In response to anticipated revenue needs, both SSGC and SNGPL have submitted official requests to the Oil and Gas Regulatory Authority (OGRA) seeking a gas price hike of up to 50% to meet their financial targets for the fiscal year 2024-25.
Earlier this year, the caretaker government approved a 175% price increase for fertilizer producers on the SNGPL network, which drove urea prices up by nearly Rs900 per bag, marking a significant cost impact on the agriculture sector.
Tanveer Ahmed, an analyst at Topline Securities, explained the potential consequences of the planned gas tariff adjustment on fertilizer prices. “As seen earlier in February, fertilizer players on the Sui network will be impacted by this incremental gas cost, and they will be forced to revise their urea prices upwards,” said Ahmed. He added, “Typically, other fertilizer producers follow suit even though their input costs remain unchanged.”
