Lt Gen Tariq Khan

Fauji Fertilizer Company (FFC)

1.The current government has now been in power for over six months. How do you see Pakistan evolving under the PTI government?

It is too early to say anything but I have been interacting with the government and the good thing about them is that I can pick up my phone and connect with anyone at the ministries. It is very easy to work and get in touch with them and they are highly accessible. They are willing to listen so there are a number of tasks we have been able to accomplish in a short amount of time in the interest of the national economy, our company and the industry as a whole. For instance, they were thinking of importing Urea back in 2018, I had a meeting with the Advisor to PM on Commerce, Hon. Abdul Razak Dawood and with the Minister of Finance, Hon. Asad Umar about the three factories in the country, which were not functional because of gas shortages. By importing Urea, the government takes three hits; firstly, it uses foreign exchange that is in short supply, secondly, importing it costs ~Rs.700 per bag over the domestically produced urea and it will have to be subsidized to local prices and the third hit is that the government will not get any revenue in the form of taxes from it. Instead a better option is to import Liquefied Natural Gas (LNG) and give it to these factories at subsidized rates, which will allow local production of Urea at much lower prices than imported urea, and it will also provide employment opportunities. The government accepted the Industry suggestion and have stopped the import of Urea with all the three factories now functioning.

2. The Fertilizer Industry has seen an impressive growth in the last few years. Please give us your output on the fertilizer industry in Pakistan and the role that Fauji Fertilizer plays in the system?

At present the urea fertilizer market in Pakistan has peaked at 6 million tons. FFC produces 2.5 Million tons and our subsidiary manufactures another half a million ton, hence, we are one of the major players in the market. We want to be compliant with international norms regarding balanced use of fertilizers and, therefore, we do not intend to push only the sale of Urea, as it will create further imbalance in the market. Our subsidiary produces Di-ammonium Phosphate and we also import Phosphate and Potash fertilizers as we are looking for alternate nutrients to Urea (nitrogen); we have also been spending a lot of money in Research & Development for enhanced efficiency fertilizers. We are amongst the first companies to have introduced a controlled Nitrogen release product through Neem coated Urea in Pakistan; we will be introducing it on a larger scale to the market very soon.

3. Fauji Fertilizer Company (FFC) is the largest chemical fertilizer producer of Pakistan with biggest market share in the country. What are Fauji Fertilizer’s objectives for 2019?

Business sustenance is an important aspect of our overall objectives which will be dominant in the year 2019. In the long-term, we believe that national sovereignty and national security are directly linked to GDP and also revolve around food security. We are planning to put together a cluster of around 50 farms in order to create a farming community and within this community, we will control all inputs such as the seeds, pesticides, fertilizers, water management as well as the outputs like marketing and warehousing in order to establish a structured agriculture industry. This community will be similar to a clubhouse where women emancipation allows them to get access to micro financing. We also hand out scholarships and create sports programs for children in our CSR program. One of our objectives it to be able to determine how the food is grown, where it is grown, what and where it can be exported to and which crops are cash crops. We also want to contribute to the national exchequer and give security to 70% of the rural population that relies on agriculture in terms of income and food security.

4. Fauji Fertilizer Company’s (FFC) net profit rose 35% and amounted to Rs. 14.4 billion for the year ended December 31, 2018. How has the firm achieved such important profits?

FFC’s sustained production and better quality are the prime factors. Obviously, the favorable market conditions also played a significant role in this turnaround. The plants are maintained by our world class team of human resource which due to unique organizational culture and practices are managing plants efficiently and making it work above their original designed capacities, with minimum disruptions and consistently setting new industry benchmarks. FFC plants are consistently ranked amongst the top 10% of the plants worldwide in capacity and online factors. We expect to maintain this performance in the current year too.

5. Fauji Fertilizer Co Ltd takes the lead in 2019 to provide relief to the farming community by reducing price of DAP Fertilizer by Rs. 100/bag. Can you please explain to us why did you reduce the prices?

Helping the farming community is at the heart of our business. However, the reduction in prices of DAP was also affected by the supply and demand situation.

6. You have diversified into power production and have injected $39 million into Thar Energy Limited (TEL), which is expected to kick-start a 330-megawatt domestic coal fired power project by December 2020. FFC Energy Limited is also the pioneer among the Wind Power Plants in Pakistan and contributing 50 MW to the national grid and further committed to address shortage of energy in the Country. What is the strategy of the company in terms of power production?

We have a huge coal deposit in the billions of tons. We are looking to use coal for gasification in addition to power generation as we do not have enough gas reserves in the country. It is one of the cleanest way to use coal. We also want to use our coal to produce fertilizers.

As far as wind power is concerned, you have rightly stated that we are the pioneers, we put up the first 50 megawatt wind plant and it was a very successful project. We have now gone a step ahead and want to establish a hybrid plant, which is a combination of solar and wind power. We intend to go into alternate energies in a big way, we are looking to produce and research in energy storage.

Alternate energies are growing at an annual rate of 2.5% globally and the reason for it being so slow is that we cannot store this type of energy. We are in touch with the expert companies in this sphere in order to develop a technology for better storage.

7. In line with the strategy of diversification, FFC has setup another business venture as Fauji Fresh n Freeze Limited (FFF) which is a state of the art plant, the first of its kind in Pakistan. Please tell us more about this project?

FFnF is an expression of our organizational interest for the farming communities and our effort in providing sustainability to not only farm earnings, but also in quality of farm produce to end consumer. In order to ensure food security for our nation, we need to look at the dynamics which sustain farmers by not only educating/ training farmers on best Agri-practices, but we also look at the market dynamics through which its product is sold fetching them commensurate income. FFnF has successfully exported various farm produce like peas, okra, tangerine, mangoes to various countries. Lately, we have shifted our focus on the domestic market. Processed and frozen potatoes (chips) and other vegetables are gaining popularity and often we are finding more demand than we can produce. Keeping the high domestic demand in view, we are planning to increase FFnF production capacity and also doubled our efforts in training/ educating farmers to strengthen our supply chain.

8. You exported 222 thousand tons to neighboring countries in 2017, which enabled the Company to contribute over US$ 48 million to the Country’s foreign exchange. What is your export strategy? Are you looking for potential partnerships or looking to expand your activities to other countries?

2017 was an exceptional year where the local fertilizer off-takes took a major hit due to various factors including climatic changes and delays in certain legislation by the government. Otherwise, we are just about able to meet national demand so exports are not a priority for now, but it could be of interest to us in the future.

9. As the biggest urea (52% market share) and DAP (56%) manufacturer in the country. Which communication strategies are you currently using to promote Fauji Fertilizer and how would you like to develop them?

We employ young people, who are experts in the field, they go and meet farmers and do soil surveys and tests. They are also a point of contact for the farmers and they advise them on the use of fertilizers. We also have a range of dealers all over the country that store and sell fertilizers to farmers.

Digitalization is a key aspect of our strategy, besides conventional means of communication we use the latest technology a lot to reach farmers. We are looking into facility management (FM) software to establish a dial-in system to simplify communication with the farmers. We are also working on digitalizing the maps and trying to get satellite coverage for the soil surveys in order to understand how crops respond to a particular soil. This project will take a year or two to materialize.

10. You launched an Agri-Services department in 1982 and established five State of the Art Farm Advisory Centers where highly qualified Technical Service Officers are striving for transferring latest Agricultural Technology and recommending balanced use of fertilizer to farmers, you have now over 1.7 million farmers benefitting from this program. How important is CSR for Fauji Fertilizer? In which CSR projects are you involved in, lately?

It is my personal dream to have a community farming system; we are allocating most of our funds towards this project which I mentioned before. We also want to improve the irrigation system to bring in sub-surface irrigation and drip system and we are looking to get funding for this.

We have a separate setup called the Sona Welfare Trust, which is a non-profit organization. They organize donations and international assistance and transfer the funds to the farmers. We also want to give some of that money to women in poultry and livestock farms and organize basic classes to help them set up cottage industries so that they can become financially independent.

11. You were commissioned in Pakistan Army in April 1977 with the coveted Sword of Honor. During your illustrious service in the Army, you have been employed on various prestigious command, staff and instructional assignments including command of a Strike Corps. You gained fame when you led the Frontier Corps to victory against the Taliban in the Battle of Bajaur in 2009. You are the Chairman of Sona Welfare Foundation (SWF) and Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC). And you are also member of the Executive Committee & Board of Governors of Foundation University, Islamabad and Director on the Board of International Fertilizer Association (IFA). But what do you feel most proud of in your life?

First of all, as far as the military career is concerned, when fighting conflict in your own country, there are no winners, I am just satisfied that we were able to stabilize the situation.

In my 39 years of service, I have never worked as hard as I have worked here; I am really enjoying my work. You get a sense of achievement right there when things work out the way you want them to.

12. What is your final message to the readers of USA Today who consider Pakistan as a potential investment destination or are looking for partnerships in the fertilizer or energy industry?

There is a huge gap in alternative nutrients in the fertilizer industry and in terms of food security, we are looking at vertical farming globally. Pakistan has the potential to contribute towards the international community for food security. Pakistan has been living in a conflict since 1971 but I do not think any other country could have survived the way we did. We have immense potential and when every other country has exhausted their potential, we still have to start. Anyone who comes and invests here, this will be a win-win situation for them whether it is in energy, fertilizer or food sectors. There are so many business opportunities in this country that one can do.