Updated on
Summary The shortage will also be coupled with price hike owing to cutting gas supply to the industry.
Fertilizer companies would be in deep shock after the petroleum ministry informed about its decision to curtail the supply of natural gas for 15 days a month with effect from August. This annual closure of gas supplies for about 3 months will result in a fertilizer shortages which would then result in estimated imports of 1.4mn tons of fertilizer to meet the requirement. Government will either have to provide subsidy to offset the price hike or would allow fertilizer prices to touch new high. Current urea prices stand at about Rs 1360 per bag against Rs 2950 per bag cost of imported urea. Expected imports of fertilizer would result in a steep broadening of trade deficit. Expected imports would cost the country US$. Advancing of subsidies to fertilizer companies would result in broadening of fiscal deficit which was recently taken care of by cuts in subsidy to KESC (Fiscal deficit recorded to be around 5.55.9% in FY11).The gas reduction is a major blow for Engro Fertilizer who has been facing gas issues throughout the year. Its existing plant was operating at 100% capacity with its new plant suffering from gas shortage and hence operating only at an average capacity of80 percent.
