Gas crisis now hits fertiliser, threatens food security

Gas crisis has found a new victim after hitting the country's national grid hard. Now, production of urea fertiliser has begun to feel the pinch, with one fertiliser factory having been unable to operate for almost a month due to the gas supply crunch.

Experts fear a food crisis if the situation continues or worsens and farmers do not get timely fertiliser supply. 

Jamuna Fertilizer Company Limited (JCFL), a urea producer, has not been able to operate for a month, while officials concerned believe the situation will continue for the next three months.

Meanwhile, the Chattogram Urea Fertilizer Limited (CUFL) has been directed to continue production by rationing.

Shahjalal Fertilizer Company Ltd and the Ashuganj Fertilizer & Chemical Company Limited are also at risk.

According to Petrobangla data, 316 million cubic metres per day of gas is needed to keep the factories' production running. But those are only getting 159 million cubic metres of gas, making it impossible to continue operations of all the factories.

Till last month, Petrobangla used to supply 3,100 million cubic feet of gas (mmcf) per day of which around 750mmcf to 800mmcf was LNG. However, supply has now dropped to 2,800mmcf as the government began injecting less liquefied natural gas (LNG) due to global price volatility, piping in only 490mmcf.

Officials of the JFCL said a target of 4.5 lakh tonnes of fertiliser production was set for the current fiscal year, but a three-month closure means that this may not be met.

The factory, at full capacity, could produce 1,700 tonnes of fertiliser per day.

It had shut on 22 June, having produced 1,275 tonnes per day before that, due to the gas crisis.

Mohammad Sahidullah Khan, general manager (operation) and head of the factory's technical department, told The Business Standard, "Due to gas shortage, the factory has stopped production for about a month. We have informed the regulatory bodies, written to them and held repeated meetings. But we haven't found a solution yet."

According to some senior JFCL officials, the Ministry of Industry, Ministry of Agriculture and the Bangladesh Chemical Industries Corporation (BCIC) are trying to get gas supply to the factory.

Experts say the government is already under pressure due to the high import cost of chemical fertilisers since the breakout of the Russia-Ukraine war, with costs soaring three times the normal price.

According to the agriculture ministry, before Covid-19 in the financial year 2020-21, Tk32 was spent to import one kg of urea fertiliser, while it is costing Tk96 or more this year, forcing the government to give Tk82 in subsidies per kg.

Against this backdrop, if local production of urea fertiliser is hampered, the pressure on imports will rise. If the imports don't materialise, it will then impact the country's food production.

Agricultural Economist Dr Md Jahangir Alam Khan told TBS, "There is now an energy and food crisis worldwide. None of the global supply systems is under a normal condition. Amid this, if we want to produce more food, we must maintain the supply of fertilsers. Because it is directly related to food production.

"If we had thought about these issues in advance, maybe we could have planned to increase local production. But in the current situation, closing the fertiliser manufacturing plants is not logical. Increasing local production should now be the main objective," he said.

In the Chattogram's Anwara, Chittagong Urea Fertilizer Limited (CUFL) sources said the company has also been asked to continue production but through rationing.

The CUFL needs 41 mmcf of gas per day as gas is one of the main raw materials for producing urea and ammonia.

Engineer Md Akhtaruzzaman, managing director of CUFL, told TBS, "There is no impact of a gas crisis so far on our production. However, the government has asked us to run the factory on a rationing basis, but we are yet to start.

"Our present production is 1,150 to 1200 tonnes. If we start rationing it will come down to around 1,000 tonnes per day," he said.

Meanwhile, Omar Farooq, MD of Shahjalal Fertilizer Company Ltd, said, "We have produced 4.23 lakh tonnes of fertilisers in the last financial year. This year there is a higher production target. So far, we have not faced any crisis."

Official figures show that the demand for chemical fertilisers in FY 2022-23 is around 67 lakh tonnes. Out of this, urea demand is 26 lakh tonnes, of which the four factories in the country are producing 10.5 lakh tonnes. The remaining 16 lakh, if not more, will have to be imported.

The import would be costly as fertiliser producers worldwide are facing a similar gas crisis and hiking the prices. 

Some European fertiliser makers, which relied on cheap Russian gas supply, were forced to shut production for want of gas.  

Shortage of gas supply is also taking its toll on fertiliser production in India and threatening kharip crop there. India's agriculture subsidy has surged and ensuring availability of fertilisers at last year's prices could be a big worry for the government, media reports said. 

International Food Policy Research Institute aired similar worries for countries including Bangladesh. 

Fertiliser price hike and concerns about availability will cast a shadow on future harvests and food security for a longer period in low- and middle-income countries, it said in a blogpost in April. In countries like Bangladesh, where a high fertiliser subsidy regime will relieve farmers of price shock, it will put tremendous fiscal pressure on the budget, it warned.

The government has been providing fertiliser subsidies to the tune of Tk8-9 thousand crores, while the Ministry of Agriculture reported spending Tk28 thousand crores on imports last year.

As fertiliser prices rose sky high, Bangladesh had to spend more than $4 billion, up by 223% from a year ago, to import fertiliser in the 11 months of the last fiscal year till May.

A momentum upended

The government's drive to increase production amid a global food grain supply crisis is now threatened by a fertiliser crisis in the offing.

Fertiliser imports from Russia and Belarus, two major sourcing countries, have stopped.

There are import opportunities from various countries including Canada, Saudi Arabia, China, Morocco, Qatar, United Arab Emirates, Tunisia, but the price increase will also take a toll on already strained foreign reserves.

Meanwhile, the Ministry of Industry has agreements with Saudi Arabia, Qatar and Dubai from where fertilisers are regularly imported.

Kazi Mohammad Saiful Islam, director (joint secretary, commercial) of BCIC told TBS, "Now three factories are in production. One has shut down due to gas shortage. However, we are discussing ways to keep the factories running. We are communicating with the countries from which we import urea, so we can import quickly if necessary."

Balai Krishna Hazra, additional secretary (Fertilizer Management and Materials Unit) of the Ministry of Agriculture, told TBS, "Our demand for urea is 26 lakh metric tonnes, and at the same time, we have to keep a reserve of 8 lakh tonnes each year. Altogether, we need 34 lakh tonnes. We have no shortage of urea till December, meaning there will be no crisis in the Aman season."

He, however, said if the current situation prevailed then there would be a crisis. "But they [the factories] have given their word that they will maintain production in any way."

Seven-and-a-half lakh tonnes of urea is required during the Aman season, which will be followed by Boro, the biggest crop which requires 60% of fertiliser supplies.