Govt considers reduction in gas tariff
AMANULLAH KHAN KARACHI—The government is considering a proposal for reduction in the gas tariffs in lieu of commitment from manufacturers for a reduction in urea prices, it is learnt from reliable sources. It is believed that reversal of gas tariffs to pre-Sep 2015 levels and decline in urea prices may present an optimal solution as it would reduce inventory levels, obviating the need for any exports which would reduce margins drastically, and it would provide a respite to the farmers and have the same impact as a subsidy on urea and DAP fertilizers.
Cutting fuel rates alone would not be effective as consumption is ~5mmbtu/ ton only. Following reversal in tariffs, quantum of the final reduction in urea prices will dictate the impact on the earnings of the firms. The performance of the fertilizer sector continues to be hit by double whammy of higher inventory amid recovery in production and low farmer demand due to increase in cost of inputs and lower commodity prices. According to details total urea inventory crossed 1.2million tons at the end of March 2016.