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Fertilizer policy
announced to attract $ 1.2 billion investment
KARACHI-Commerce Minister Abdul Razzak Dawood on August 30
announced
"fertilizer Policy" 2001 to provide fertilizers to farmers at
reasonable prices and attract an investment of $ 1.2 billion
in next ten years.
 Giving the details of the policy, the minister said that the
fertilizer policy which was approved by the Cabinet recently
will be effective from July 1, 2001. He said the previous
policy was announced in 1989 for ten years and it has achieved
its objectives. He said the new policy has five objectives
including the provision of fertilizers to farmers at
reasonable prices and on long term basis as well as to bring
in new investment, offer reasonable return to investors.
He said that one fertilizer plant requires an investment of $
350 to 400 million. The other objectives of the policy are to
ensure maximum possible price for gas in the country and try
to keep fertilizer prices at about 20 percent below import
prices. He said the demand for fertilizers was increasing with
the rise in agriculture production and in next ten years
Pakistan will need additional two million tons of fertilizers
for local consumption
.
The minister pointed out that present production of fertilizer
was 4.2 million tons and the consumption stood at 4.4 million
tons which is expected to increase to 6.3 million tons in next
ten years. He was of the view that Pakistan would have to
spend $ 1.7 billion on the import of fertilizer if it failed
to attract investment in this sector. He said the draft of the
policy has been discussed with the Ministry of Petroleum for
gas pricing issue and Natural Resources and Ministry of
Agriculture and Food for projected demand of fertilizer by
agriculture sector in the next ten years. He said the
policy has three parts.
Part I deals with existing fertilizer plants, Part II with new
plants and Part III with those existing plants, planning for
expansion and balancing, modernizing and restructuring (BMR).
Talking of existing plant, the minister said that the gas
price for fuel purposes like heating boilers and burning will
remain at par with other industries but the gas prices for
feed stock (input) will be increased every year for five
years.
He said that in the first year gas price will be increased by
5 percent, in second year by 7.5 percent, third year by 10
percent, fourth year by 12.5 percent and in fifth year by 15
percent. He said that gas subsidy on fertilizer will end in
next five years. Presently, gas prices for feed stock is
subsidized. Referring to new plants, he said that the price of
gas are linked to gas price movement in the Middle East and
will be 10 percent less for feed stock while it will remain at
par with other local industries for
fuel consumption.
He said currently gas prices are 77 cents in many countries in
the Middle East including Saudi Arabia, Oman, Qatar, UAE,
while Pakistan will offer gas to the new plants at 70 cents.
Mr Dawood said that a committee has been constituted under
Ministry of Industry to monitor movement in gas prices and the
supply and demand situation in the country. He said this will
attract foreign investment in the fertilizer sector as this
policy is fixed for ten years to ensure consistency in the
policy.
"We are expecting three new fertilizer plants in the country
under the incentives offered in this policy", the minister
said. He pointed out that the window for obtaining permission
for new fertilizer plants will be open for four years only.
For expansion in the existing plants, the gas prices will be
the same for feed stock for five years, he added. The new
prices of gas will be calculated in dollar term and
convertible in rupee and revised on 1st January and 1st July
every year.
The import of machinery for these plants will be as per normal
import policy and no special incentive will be provided to
ensure that level playing field is created between the old and
new manufacturers. The minister said that second hand plants
will be allowed for import for the manufacture of fertilizer
under the new policy. He said that privatization of gas
companies will not affect price subsidy on gas to new plants
as the government will supply gas to these plants from Mari
Gas Field which will not be privatized.
He said the new policy allows duty free import of rock
phosphate to phosphatic fertilizer manufacture and duty-free
import of raw material to NPK fertilizer producers. He said
that Pakistan will market its fertilizer policy world wide to
attract investment. Mr Dawood said that he will approach a
Norwegian company which has three fertilizer plants in the
Middle East to set up fertilizer plant in Pakistan. "We are
offering gas at cheaper prices plus a large agriculture sector
as consumer of fertilizers to the foreign investors", the
minister observed. August 31
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