LAHORE - Local fertilizer manufacturing plants were forced to shut down for over six months last year, causing shortage of urea and subsequent price hike by whooping 141 per cent in just 2 years. The ill-conceived gas load management plan badly hampered manufacturing of urea and hence dealt a severe blow to agriculture sector, the backbone of entire economy, said Agri Tech CEO Ahmad Bilal.
He said, “Natural gas is used to produce fertilizer which is used for good output of crops. Hence, it has a direct impact on agriculture economy.”
“Therefore, maximum value addition of natural gas is in fertilizer sector if compared with other industries as well as power, CNG and commercial sectors. Alternatives to gas for industrial and other sectors are very much there. These substitutes include furnace oil, LPG, LNG, diesel and coal,” he said.
Non supply of gas to fertilizer sector is hurting farmers as well as agriculture sector of economy besides causing maximum urea price hike. Higher input costs and lower produce prices have started crippling farming community. Fertilizer expenses saw the maximum increase among all inputs during last year.
Within 2 years, urea prices increased by 141 percent to Rs1810/bag from Rs750/bag in Dec 2009. Government imposed two different type of taxes which includes 16 percent GST and Gas Infrastructure Development Cess of 193 percent. Combined impact of both in current price is Rs384/bag. Cess impact on urea manufacturers is Rs258/bag w/o GST, however, industry passed on 50 percent of this impact to the farmers. But the major price increase impact of Rs537 per bag was due to severe gas curtailment.
Engro earnings
Engro Corporation (ENGRO) has announced its 2011 result, reporting earnings of Rs8.1b (EPS: Rs20.50) compared to Rs6.8b (EPS: Rs17.26) in the last year, up 19 per cent YoY. Along with the result, the company has also announced a final cash dividend of Rs2 per share that would take cumulative dividend for the year to Rs6 per share.
The company has also announced a bonus issue of 30 percent. The top line of the company grew by 43 percent YoY to Rs114.6b which helped the gross margins to hike up to 28 percent from 25 percent last year. Furthermore, company’s financial and other charges increased by a massive 176 percent to Rs14.2b.