The federal government is considering allocating Rs. 20 billion in subsidies for the fertilizer sector in the upcoming federal budget to address outstanding gas price liabilities and support the continued production of essential agricultural inputs, sources told ProPakistani.
According to officials, the proposed subsidy is intended to help resolve long-standing financial disputes between the energy and fertilizer sectors that have emerged due to gas pricing adjustments, tariff revisions, and delayed subsidy payments.
The planned support package is expected to ease financial pressure on fertilizer manufacturers, ensure uninterrupted operations at production plants, and help maintain a stable supply of urea and other key fertilizers required by farmers across the country.
Pakistan’s fertilizer industry relies heavily on natural gas as both a feedstock and fuel source. Over the years, changes in gas tariffs and pricing mechanisms have led to significant arrears and payment disputes within the sector.
Sources said the proposed subsidy is being viewed as a temporary relief measure while the government works on broader reforms related to gas pricing, industrial tariffs, and circular debt management.
Officials believe the move could also help prevent sharp increases in fertilizer prices, which would otherwise raise farming costs and contribute to higher food inflation. Given the agriculture sector’s significant contribution to Pakistan’s economy and employment, maintaining affordable fertilizer prices remains a key policy objective.
At the same time, the government is reviewing wider energy sector reforms aimed at reducing circular debt and introducing a more transparent and uniform gas pricing framework for industrial consumers.
Sources added that the subsidy mechanism could facilitate the settlement of gas price differentials and enable SNGPL to recover notified gas charges from fertilizer companies, helping resolve long-standing financial disputes and improving liquidity across the energy supply chain.
