The newly-elected “pro-business” federal government is looking for the reasons that kept the foreign and local investors at bay during the past five years, the energy crisis stands to be one of the most causes that crippled the overall economy.
The acute shortage of electricity and gas has persistently been haunting the foreign and local businesses operating in the energy-starved Pakistan.
Well-illustrated in this regard is the Engro Corporation, one of the country’s biggest business conglomerates. The business giant, some three years ago, developed a state-of-the-art fertiliser manufacturing plant at Dharki worth $1 billion. Rohail Mohammad, chief executive officer of Engro Fertiliser, said the plant was envisaged not only to fetch handsome profits for the group, ensure food security in one of the world’s most populated country, but also save at least $500 million of foreign exchange for the dollar-hungry Pakistan on account of fertiliser import substitution.
The facility was to cover at least 1.3 million tonnes of fertiliser import if run on full capacity. Unfortunately, the plant turned to be a liability for the investors, thanks to the Sui Northren Gas Pipelines Limited (SNGPL) that never supplied uninterrupted gas to the plant. “The SNGPL supplied us gas for only one month out of the first half of this year (2013),” Rohail lamented. The Engro executive claimed that his company, Engro Fertiliser, had incurred a pre-tax loss of Rs 8 to 10 billion for the plant’s closure for the five months due to unavailability of gas.
Overall, Rohail said since it inception some three years back the Dharki plant had registered a margin loss of Rs 50 billion. “Our pre-tax loss amounts to Rs 50 billion in last three years,” he told Pakistan Today.
The average gap between the demand and supply, he said, could be 2bcf, depending on the price. The Engro Fertiliser chief said the Dharki plant during the last three years received around 100mmscfd less gas than what was contracted with the government.
This gas curtailment, he said, had also reflected adversely on the prices of urea that shot up in the agrarian country by 50 percent. Consequently, the fertiliser plant is relying on the 60mmcfd gas it is temporarily being supplied from the Guddu gas field.
Rohail said his side now was looking at the Kunar Pushaki fields for the supply of 130mmcfd gas of total 250mmcfd the facility is to provide to the fertiliser plants, including Fatima Fertiliser, Bin Qasim and Fauji Fertiliser. Despite all the odds, he said, the fertiliser plants were poised to invest another $100 million to make some renovation of pipelines at the Kunar Pushaki facility.
“The investment would be made collectively,” Rohail said. The Engro executive said he had approached the new PML-N led government which seemed serious to cope with the challenges effectively. “We put our contract (with the previous government) to the government and asked it as to how would it honour it,” he said. He also brushed aside the proposals that the fertiliser industry be closed down to curb the gas scarcity.
“The fertiliser industry consumed hardly 10 percent of total gas produced,” he said adding the industry was saving at least $3 billion of the much-needed foreign exchange for the country on account of imports of the agriculture input. Besides, he said, the industry through providing cheap fertiliser was saving some Rs 120 billion for the exchequer under the head of fertiliser subsidy. He said if provided with uninterrupted gas the fertiliser producers could easily cater the country’s need where the demand stands at 7.7 million tonnes against the plants’ capacity of 9 million tonnes.
