Subsidy for select fertilizer firms creates price disparity, strains gas utility

Pakistan’s federal government has created a pricing distortion in the fertilizer sector by continuing to provide heavily subsidized gas to two manufacturers — Fatima Fertilizer and Agritech — while other producers pay significantly higher rates, industry and government sources revealed Tuesday.

Despite uniform retail prices for urea fertilizer nationwide, the cost of gas supplied to manufacturers — a critical input — remains uneven. Fatima Fertilizer and Agritech receive re-gasified liquefied natural gas (RLNG) at a discounted rate of 1,597 rupees per million British thermal units (MMBtu), compared to the government’s procurement cost of 3,400 rupees per MMBtu, creating a gap of 1,803 rupees per MMBtu.

The Ministry of Petroleum recently told the Cabinet that this subsidy costs Sui Northern Gas Pipelines Limited (SNGPL) 13 billion rupees annually and has contributed to 78 billion rupees in outstanding RLNG receivables.

The discounted rates were previously approved only until March each year. However, the Cabinet extended the subsidy for Fatima Fertilizer and Agritech for another three months — through June — raising concerns over preferential treatment and financial strain on the gas utility.

“The distortion is there. Despite repeated advice from the Ministry of Industries and Production against favoring specific plants, the Cabinet — which includes the finance, industries and food ministers — makes these decisions,” a senior government official told Nukta.

NFC Review Amid Pricing, Supply Concerns

In a separate meeting Monday, Haroon Akhtar Khan, the prime minister’s special assistant on industries and production, reviewed the National Fertilizer Corporation (NFC)’s performance and assessed pricing, production and farmer relief issues.

Attendees, including Industries Secretary Saif Anjum, discussed input cost disparities and the need to ensure affordable urea for farmers.

Khan said, “To facilitate farmers, low-cost gas has been provided to fertilizer companies,” emphasizing the government’s commitment to consistent gas supplies for fertilizer production. However, he did not address the price disparity among manufacturers.

Khan directed officials to prepare a report on urea production, pricing and retail trends, and instructed the NFC to brief Prime Minister Shehbaz Sharif on sector challenges and proposed solutions.