Engro remains shut despite court order

Engro CorporationLAHORE: The Sui Northern Gas Pipeline Limited is violating the court order to provide gas to the Engro Fertilizer plant, as it has not started supplying gas to the plant despite a lapse of over 12 days since the judgment of the court.

The Engro new Envin urea plant, having capacity to produce 1.3 million tonnes of urea annually, is waiting for the government to act positively on the SHC judgment.The Sindh High Court (SHC) has directed the Sui Northern Gas Pipeline Limited (SNGPL) to supply guaranteed quantity of 100mmcfd gas to the Engro Fertilizer plant. Industry sources said that the company is facing the loss of millions of rupees as a result of the shutdown of Engro’s new plant which went operational in Dec 2010 after the investment of $1.1 billion.The SNGPL and the Engro Corporation had struck a deal of supplying 100mmscfd of gas to the new fertilizer plant, sources said. “The contract specifically states that Engro is entitled to receive the first 100 mmscfd from Qadirpur gas field and if it starts depleting or is down, the SNGPL is contracted to give its gas from its network, stated an Engro Corporation official seeking anonymity.

The official said that after many deliberations with the government, the Engro Fertilizers filed a writ as a last resort in the Sind High Court, requesting the court for justice. The Sind High Court, on Oct 18, passed the judgment in favour of the company, ordering the government to supply 100mmscfd of gas to Engro’s new plant as per the contract.But unfortunately the SNGPL, setting aside the court order, did not supply gas to the Engro fertilizer plant on the plea of gas shortage. On the other hand the utility has started supplying gas to the Pak Arab Fertilizer plant on political influence, Engro officials claimed.

They said that on October 19, a day after the SHC verdict, the government started to provide gas to a fertilizer plant in Multan that required 50mmscfd of gas, despite claim of gas crunch. Industry sources said that due to gas supply suspension, the Corporation is left with only two options of either firing its extra staff or increase its product rate being generated from other plants of the company.They said that the company has so far increased urea rates four times just in six months. They said that the Engro had raised the urea rate fourth time in the second week of October. Following Rs202 per 50-kg bag increase in urea price by Engro, the FFC, FFBL and Fatima Fertilizer had also increased the urea rate by Rs 202 per bag on the plea of gas curtailment to the fertilizer plants.

Industry sources said that Fauji Fertilizer Company has elevated the urea rates unjustly, because the company was receiving smooth gas supply while other companies plants were shut due to gas supply suspension. Now the current ex-factory price stands at Rs1,580/bag.Experts said that Engro will reverse the rate, by immediately reducing price by Rs350-400 per bag as soon as gas is fully resumed to the Engro plant. They also feared that if gas is not resumed as per the contract, the company could raise rates by Rs400-500 per bag to compensate losses as well as to secure the job of present employees. They observed that Engro has not received gas for 148 days in 2011 though the plant was set up after a government sovereign guarantee, which was awarded to Engro following an international tender process.

Industry sources said that continued gas curtailment would lead to greater shortage for the Rabi season and beyond. They said that government knows how important the agriculture sector is so this shutdown is baffling. They have to ensure supply on a consistent and equitable basis so farmers and the agriculture based economy are not adversely affected due to shortage of urea.They maintained that in the first half of the year, the fertilizer sector received only 3 days of gas per week which was the lowest quantity given to any sector, despite the fact that agriculture is the mainstay of our economy and fertilizer is the essential input.

They said that gas curtailment widened the supply demand gap for urea.The lesson for the government is simple – increased gas supply helps bring urea prices down and ensures urea for farmers. As the govt is not supplying them gas on priority basis we are compelled to raise the rates, they argued. Fertilizer sector experts emphasized the complete restoration of gas supply to plants on the SNGPL network to ensure the urea demand in the country. They said that the companies were gravely disappointed on the curtailment of gas which has forced them to enhance their rates to lessen the losses. – Nation