Fertilizer factories not paying additional price for gas
The state-run fertilizer factories have been unable to pay the increased price of gas for over a year due to financial constraints.
If they pay the additional price, they will incur a loss of Tk 10,000 per tonne.
However, a loss of Tk 35,000 is being incurred per tonne for importing fertilizer.
This is costing the government of valuable hard currency US dollars. Although the government is providing subsidies for import to meet the deficit, it is not providing subsidies for the production.
Energy and mineral Resources Division sources indicate that as of last April, there is an outstanding gas bill of Tk 12.11 billion in fertilizer factories.
Another three months have elapsed since that time. The matter has been sent to the Prime Minister's Office to address the complexities of bill collection. The prime minister has issued directives to collect gas bills at the increased prices. Subsequently, in June, the energy division communicated this matter to the industries ministry through a letter.
The Bangladesh Energy Regulatory Commission (BERC) raised the gas price for all consumer categories in June of the previous year following a public hearing.
Notably, the gas used in fertilizer factories saw the significant increase—approximately 260 per cent. The price was set at Tk 16 from the previous rate Tk 4.45 per unit. However, even after more than a year, the government-owned fertilizer factories have not settled the additional price.
Four urea plants operate under the Bangladesh Chemical Industries Corporation (BCIC), which falls under the industries ministry. Among these, Jamuna and Shahjalal Fertilizer factories are presently in production. However, Chittagong Urea Fertilizer Factory and Ashuganj Fertilizer Factory remain shut due to gas shortage. Consequently, despite having the capacity, 2500 tonnes of fertilizer cannot be produced daily.
Fertilizer factory officials say that they are supposed to get the increased price of gas as a subsidy from the government. As they are not getting this money, they are paying the bill at the previous rate. Due to this, the amount of outstanding bills is increasing every month. If the government releases the subsidy, the gas bill will be paid.
Bangladesh Oil, Gas, Mineral Resources Corporation (Petrobangla) says gas is supplied to the fertilizer plant from four of its six gas distribution companies. BERC fixed the prices on 5 June last year. After that, the gas price was increased by a record amount through an executive order last January, but not for fertilizer factories. But the government fertilizer factories are paying the gas bill at the previous rate (Tk 4.45). The gas distribution company reported the matter to Petrobangla to collect the dues. After that, Petrobangla discussed it with the energy division. The factories has not started paying outstanding bills despite directives from the energy division.
According to BCIC sources, the annual demand of urea fertilizer in the country is 2.7 million tonnes. Currently, the production capacity of the government and private plant is 2.2 million tonnes. Ghorashal Fertilizer Factory with production capacity of 1 million tonnes will be launched next October. Then it will be possible to fully meet the demand of the country. But it may not be possible due to shortage of gas. The supply of gas to the fertilizer plants is reduced or stopped most of the time. The government has to import fertilizer by spending dollars.
Saidur Rahman, the chairman of BCIC, told Prothom Alo that a rise in gas prices would lead to an escalation of production costs. However, selling fertilizers at higher prices is not feasible. If gas prices are increased, the fertilizer factory would face closure due to incurring losses. Consequently, they have requested the government to provide subsidy, and upon receiving it, they will settle the outstanding gas bills.
Nonetheless, the government's policy regarding fertilizer subsidies remains unclear to many.
Two officials familiar with fertilizer factory management said that, at the previous gas price, the cost to produce one tonne of urea fertilizer stood at Tk 22,000. However, with the new gas price, the production cost would rise to Tk 32,000.
BCIC sells fertilizer to the government at Tk 25,000 per tonne. Consequently, paying an additional price is not possible for them.
Moreover, at present, each tonne of fertilizer is being imported from the global market at Tk 70,000. In this scenario, the government is subsidizing the additional cost. Even with the increased gas price, the domestic production of urea remains feasible at half the cost of imports.