The government is working on a viable gas pricing plan for the fertilizer sector after discovering that producers have not passed on the benefits of subsidized gas to farmers.
The Economic Coordination Committee (ECC) recently emphasized the need to stabilize fertilizer prices and tasked relevant ministries to develop an effective plan in this regard, reported a national daily.
Fertilizer manufacturers collected billions from farmers in Gas Infrastructure Development Cess but failed to deposit these funds in the national exchequer. The Petroleum Division explained that providing gas to fertilizer plants at Oil and Gas Regulatory Authority (OGRA) prices would either burden domestic consumers or require a subsidy from the Finance Division.
The Ministry of Industries and Production noted that subsidies had not resulted in lower urea prices for farmers and called for eliminating distortions in gas pricing. In this reference, the Finance Division refused to endorse further subsidies to cover the price differential.
Previously, the ECC approved running two SNGPL-linked plants from January to March 2024 at Rs. 1,239/mmBtu. The Ministry of Industries proposed extending the operation of Fatima Fertilizer (Sheikhupura) and Agritech until September 30, 2024, at Rs. 1,597/mmBtu, treating the price differential similarly.
The ECC then deferred its decision and instructed authorities to come with a new pricing mechanism for the fertilizer sector. It also directed the Petroleum Division to continue current gas supply arrangements in the meantime.
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