Farmers are not applying adequate quantity of phosphatic fertilizers


July 26 - Aug 01, 2004





At the time kharif crops sowing was at its peak, the GoP announced reduction in the price of DAP fertilizer. The President as well as the Finance Minister has made this announcement. While there has not been corresponding reduction in retail prices of DAP, farmers are delaying its application hoping that prices will come down shortly. It is feared that the delay in application of DAP will not only adversely affect the yield of cotton but mostly the kharif crops.

Interestingly most of the reports appearing in the media are regarding the three leading fertilizer manufacturers, producers of only one type of fertilizer, urea. It may be true that the cultivable area of Pakistan is deficient in nitrogenous content and the deficiency is met through application of urea. However, unless phosphatic fertilizer does not complement urea, the prospects of improving yield remain low. Lately, it has been observed that farmers were not applying the required dosage of phosphatic fertilizer due to its higher prices. To ensure input of all the nutrients in appropriate dosage, the government was obliged to bring down prices of phosphatic fertilizers.

Phosphorous is one of a major plant nutrient and an important input to enhance crop yield. The cultivable land in the country is also deficient in phosphorous and the deficiency is met through application of various phosphatic fertilizers like DAP, MAP, TSP, SSP, NP and blended fertilizers like NPK. Nearly 60% of the deficiency is met by DAP, while MAP, TSP, SSP, NP and NPK fill the remaining 40%. The wide variety of phosphatic fertilizers provides farmers the choice to purchase the right one depending of the crop requirement and soil needs.

Pakistan has attained self-sufficiency in urea production but meets bulk of phosphatic fertilizers requirement through import. Therefore, prices of phosphatic fertilizers in Pakistan are dependent on their international prices as well as the duty structure. The farmers have been complaining that the impact of movement of international prices may be one of the reasons for higher prices, but the real cause has been various taxes applicable on phosphatic fertilizers. They have been demanding that all types of duties and taxes applicable on fertilizers should be withdrawn.

The President of Pakistan during the Farmer Convention and the Finance Minister in his Budget speech announced price reduction of Rs 100 per DAP bag through reduction in deemed price of DAP for GST calculation and reduction in the withholding tax at import stage from 6 per cent to one per cent. However, industry experts say that keeping in view the announcement, price reduction works out to be Rs 80 and not Rs 100 per bag.



Though, the government has announced measures, which should have brought the prices down, but retailers have not reduced the price on the existing inventory. They promise to bring down the price on the fresh arrival. Another observation is that the SRO issued in November 2003 fixed deemed values of all the phosphatic fertilizers for the purpose of assessment of GST. An additional relief was provided in Federal Budget 2004-05, but the price for the purpose of GST calculation was reduced from Rs 9,280 to Rs 4,610 per tonne for DAP only. It is feared that all other phosphatic fertilizers with the exception of DAP will become un-competitive in the market and farmers' choice will be severely limited.

The government had constituted a committee to come up with suggestions for amending the existing Fertilizer Policy. However, the committee hasn't come up with any recommendation. According to a sector expert, "The policy needs only one amendment that is regarding guaranteeing gas (feedstock) price for new plants for next ten years. However, it seems that the government is still engrossed in the debate on subsidy. Why don't the committee member understand the fact that no subsidy is offered on feedstock it is sale of low quality gas at a discounted price".

It is also necessary to reiterate that the delay in establishment of new urea plants is once again leading Pakistan to become an importer of this commodity. The policy planners must not be carried away by the perceived high foreign exchange reserves. The inflow is going down but outflow is increasing. Why to waste foreign exchange on import of a commodity, which can be produced at much lower cost as compared to its international prices?

On top of every thing the performance of Pakistan's economy and exports are directly dependent on agriculture, about 70% of total export proceeds are from export of textiles and clothing. There is a lot of talk about growth in large-scale manufacturing sector, is it not a fact that two of the largest industries of Pakistan are agro-based?