Friday, 1 July, 2022

Plight Of State-run Fertilizer Factories

Shaikh Rezanul Haque Manik

Fertilizer is one of the most important ingredients to boost agricultural output. Ever since independence and even before it, Bangladesh has been striving to augment the production of fertilizer to meet the ever-increasing demand in agricultural sector. And in this quest with the passage of time, a number of fertilizer factories have been set up across the country. But over the past few years, these units, especially four of them have now turned out to be what is called a “White Elephant” as they are consuming natural gas immensely while producing urea fertilizer much less than their peers do.

The factories which operate under the state-run corporation, Bangladesh chemical Industries Corporation (BCIC) are Jamuna Fertilizer Company Limited (JFCL), Ashuganj Fertilizer and Chemical Company Limited (AFCCL), Chittagong Urea Fertilizer Limited (CUFL) and Shahjalal Fertilizer Company Limited (SFCL).

The four factories in question churned out 7.96 lakh tonnes of granular urea in the financial year (FY) 1920-21, consuming around the double required gas – the key ingredient to manufacture urea. The wastage of gas in these state-run fertilizer factories in just nine days is enough to generate a day’s electricity, about 9000MW, for the entire country, according to an estimate by the Government’s Power Sector Master Plan. These sheer wastage are perfect example of how terribly inefficient many of our state-run enterprises have become and how the authorities concerned callously turned a blind eye to them, despite the factories drained away a significant amount of our precious resources. On average, four units consume 43.72 million cubic feet (mcf) of gas to produce one ton of urea whereas the global standard is 25 mcf, according to the documents of BCIC. The low fuel efficiency of these factories has been attributed to old machinery, no overhaul in years, interruption in gas supply and lack of skilled workforce.

Of the four factories, AFCCL, CUFL and JFCL have already exhausted their 20 years life span. AFCCL and CUFL were commissioned in 1981 and 1987 respectively while JFCL started production in 1991. The performance of SFCL in Sylhet, which started production a little more than five years ago, is also disappointing. The low productivity of these state-run factories has been open secret for years. The wastage has already stressed the country’s fast depleting natural gas reserve and incurred huge economic losses as these factories have had to run on enormous government subsidies – the amount of which has also been escalating with every passing year. In FY 2015-16 subsidy for these factories amounted to TK. 235 crore, which nearly tripled to stand at TK. 659 crore in FY 2019-20, according to the annual report of the Ministry of Industry.

Over the last five years, the wastage of gas at the four factories is about 37,110 mcf per day. The government, in the light of Power Sector Master Plan (PSMP) 2016 acknowledged such drain of gas across the country. If the international benchmark is followed, the country could have saved 130mmccd gas daily which is equivalent to 1000 MW power, cited the PSMP 2016. This is obviously a dismal picture as far as our fertilizer production is concerned. We must get rid of it. We cannot jeopardize our prospect of fertilizer and of gas as well operating these age old and dilapidated plants. Also we cannot afford to waste our natural gas or sell at a subsidized price as the price of LNG is rising day by day worldwide. The factories get gas at a subsidized rate. But they have to calculate their production cost against the international LNG market price if they want to become economically viable.

These factories are like a white elephant which needs a lot of fuel but in return gives us little or nothing. Yes, we acknowledge the fact that a forty year old factory with its ramshackle machinery will not pay back optimum output. To make it functional at the desired level, it needs routine overhaul, uninterrupted gas supply and meticulous planning which are found missing at the top echelon of the ministry.

In contrast, Karnaphuli Fertilizer Company Limited (KAFCO), the lone multi-national joint venture in the sector with 43.50 percent government share, is almost at par with the global standards of consumption-production ratio. It produces urea with an efficiency of around 27 mcf/ ton. Commissioned in 1991 in Chittagong, KAFCO has become successful because it invests a lot of money in maintenance and overhauling. The government buys urea from KAFCO at an import price and their income is good enough to invest in maintenance. Here, a machine is overhauled every 18 months, which the other fertilizer factories cannot do owing to financial constraints. In the case of KAFCO, the government sells gas at import prices as well.

Bangladesh needs about 2.42 million ton of urea each year. Of this , the state owned factories including the joint venture KAFCO cater around 1.5 million ton while the rest urea, close to 1 million are imported, according to the data from agriculture ministry. Needless to say, to augment the output in agricultural sector fertilizer plays a pivotal role.

Now, it sounds like crying need that authorities concerned should expeditiously invest in balancing, modernizing, replacement and expansion (BMRE) at these factories and bring skilled and committed manpower in order to make these units economically viable and save the country’s precious gas instead of endlessly providing them with such massive subsidies. The fact that authorities concerned have failed to redress those issues for decades shows an uncalled for apathy on their part which is completely unacceptable. We need to understand that gas is an invaluable resource which is fast depleting and we cannot waste gas the way it is being drained away all the year round by these state-run fertilizer factories.

We urge the government to immediately take proper steps, to make sure that such wastefulness is stopped and to ensure that this message is sent loud and clear to all state-run enterprises and people in charge of their operation. The sooner it is done, the better.


The writer is a retired Deputy General Manager, BSCIC