The federal government is expected to allocate Rs. 20 billion in subsidies for the fertilizer sector in the upcoming budget to clear outstanding gas price arrears and sustain production of key agricultural inputs, sources told ProPakistani.
The proposed allocation is aimed at addressing long-standing disputes between the energy and fertilizer sectors over gas pricing and tariff adjustments, which have resulted in accumulated financial liabilities.
The subsidy is expected to ease liquidity pressure on fertilizer manufacturers, ensure uninterrupted plant operations, and maintain stable supplies of urea and other essential fertilizers for the agriculture sector.
Pakistan’s fertilizer industry depends heavily on natural gas as both feedstock and fuel. Repeated tariff revisions, differential pricing structures, and delays in subsidy settlements have contributed to mounting arrears across the sector.
Sources said the measure is being treated as short-term relief, while the government simultaneously considers structural reforms in gas pricing, circular debt management, and industrial tariff rationalization.
The subsidy also aims to prevent sharp increases in fertilizer prices, which could raise production costs for farmers and intensify food inflation. Agriculture contributes nearly one-fifth of GDP and employs a large share of the workforce, making fertilizer affordability a key policy concern.
The government is reviewing broader energy sector reforms, including the reduction of circular debt and a more uniform gas pricing framework for industrial users to improve transparency and financial stability.
Sources added that the proposed mechanism would allow settlement of gas price differentials and enable SNGPL to recover notified gas prices from fertilizer producers, helping resolve long-standing payment disputes and easing pressure on the energy supply chain.
