CHEMICAL FERTILIZERS

Helping in boosting nutrient content of soil

SHABBIR H. KAZMI
Sep 17 - 23, 2007

The average yield of most of the crops in Pakistan is much lower compared to its next door neighbor India. The poor yield can be attributed to lower nutrient content in Pakistan's cultivable land. The issue can be overcome through efficient and balanced use of the chemical fertilizers.

Prior to the establishment of Pakistan's first ever chemical fertilizer plant in late sixties most of the domestic demand for nutrient materials was met through manure/cow dung and partially through imported chemical fertilizer. However, most of the farmers were ignorant of the effectiveness of the chemical fertilizer.

Fertilizer industry may have few players but they have been meeting the local demand as well as exporting urea, whenever exportable surplus is available. However, over the last few years the country has been forced to import urea and the quantum is on the rise. Along with this the country has to import DAP in large quantity because of its limited production in the country.

The first ever urea manufacturing plant with 178,000 tons annual production capacity was established by Engro Chemical Pakistan. Then came other players i.e. Dawood Hercules, Fauji Fertilizer and Pak Saudi Fertilizer. A few smaller companies also commenced production of other types of fertilizers. At present the industry has capacity to produce 4.4 million tons urea.

The country was required to double the urea production capacity by 2015 to remain self sufficient in its local production. However, no plant has been established since announcement of Fertilizer Policy in 2001. At the best players have been increasing capacity marginally trough de-bottlenecking. Despite repeated calls from the industry the government could not incorporate appropriate amendments in the Policy and the result is that millions of dollars are being spent on import of urea.

There was pressure on the government to withdraw all types of subsidies, including the one being paid to the agriculture in the form of supply of gas to fertilizer plants at subsidized rate. However, the refusal by the government to supply gas to fertilizer plants at subsidized rates has led to import of urea costing millions of dollars and putting pressure on country's liquid foreign exchange reserves.

It was also alleged that fertilizer manufacturers have benefited the most from the supply of gas at subsidized rate. Some of the critics termed high dividend distribution by the urea manufacturers as profiteering. But they completely ignore the role being played by the fertilizer manufacturers. It is evident from country becoming self sufficient in urea production and even producing exportable surplus. Local production also helped in saving million of dollars to be spent on urea import.

One fails to understand government's stance on subsidies in general and subsidy to fertilizer plants in particular. If the developed countries have the right to protect their farmers through subsidy payment why can't Pakistan do the same?

One may argue on the mechanism of subsidy payment. However, the cardinal rule should be transparency and quantification. It is understood that the gas price is made public and government also monitors urea pricing. Even the payment being made to Fauji Fertilizer Bin Qasim is properly documented. The policy is driven by the need to promote use of proper doze of DAP by making it affordable to the farmers.

Lately, two projects have been initiated, one by Fatima Fertilizer and the other by Engro Chemical. The extraordinary delay in initiation of these projects was due to reluctance of the government in allocating gas and guaranteeing its price.

Interestingly, the government had dedicated Mari gas field for the fertilizer industry in through Fertilizer Policy announced in 2001. While the allocation of gas was denied to fertilizer plants, the government continues to supply gas to WAPDA thermal power plants from this field. Strangely, Engro's new plant will get gas from Qadirpur instead of Mari field enjoying proximity to plant.

The recent hike in wheat price, inadequate production of cotton and sugarcane should be an eye opener for the government. The government has to protect the interest of all the stakeholders. Production of major crops is directly dependent on the nutrients present in the soil. The nutrients normally include nitrogenous, phosphatic, potassium and other miscellaneous. Crops need balanced used of fertilizer.

One of the biggest contributions of fertilizer manufacturers have been "Farmer Education" which is aimed at training them about time of application, quantity to be used and appropriate dosage of the various nutrients. However, there are other factors which contribute towards improving yield.

The government should remove all the impediments facing the fertilizer industry because 1) it provides the basic nutrients from the crops, 2) all the raw materials are available locally, 3) helps in booting production of wheat, rice, cotton and sugarcane and 4) all the manufacturers discharging their corporate responsibilities efficiently and diligently.

INDUSTRY OUTLOOK

The fertilizer manufacturing is one of the best performing industry of pakistan. Its role should not be undermined and the policies should facilitate establishment of new urea and DAP plants. Availability of gas also does not pose any problem after the dedication of Mari gas field for the fertilizer industry. The two largest urea manufacturers Engro and Fauji get gas from this field. Both the manufacturers, based on their expertise, should be convinced to make fresh investment for capacity expansion.

The policy makers should also accept the rationalization that gas is not supplied to the fertilizer plants at subsidized rates. It is sale of low quality gas at a discounted price.

On top of every thing production of urea through low quality gas is a much better proposal than diverting gas to power Plants. The country needs to boost production of all the items, to achieve larger exportable surplus. Achieving exportable surplus of urea is necessary for the financing of DAP import.