WHILE the people wait patiently for dividends of a democratic set-up, the government under mounting economic pressure has been forced to submit to the demands of the powerful fertiliser lobby.

On October 14, three days after the retail price of DAP (di- ammonium phosphate) was raised from Rs3,000 to 5,500, the government agreed to provide a subsidy of Rs2,200 per 40kg bag and fixed its price at Rs3,050 per bag. The PM chaired the Economic Coordination Committee of the Cabinet meeting in Islamabad the same day. It was later announced that the ECC had approved Rs27 billion subsidy for DAP fertiliser to bring it within the reach of wheat growers.

A member of the ECC, explaining the logic of the decision, told Dawn that the conditions created by the strong fertiliser lobby necessitated the immediate decision. Any misstep at this stage, when wheat sowing is about to start, leading to disruption in availability of key agriculture inputs, would have jeopardised the government efforts to achieve the set target and revitalise the agriculture sector. We cannot afford to alienate our rural supporters. Besides good wheat crop is also necessary to achieve food security”, he added.

The higher support price of wheat has encouraged the farming community to strive for a better crop. “The non-availability of DAP at an affordable price at this stage could have upset cultivators’ plans of a bumper wheat crop”, Khawaja Shoaib of the Farmers’ Vision Forum, a Multan-based organisation, said over telephone.

The well-informed fertiliser companies, it seems, timed their move carefully and struck where it hurts the most to get the desired results. Apparently, there is no joint platform of fertiliser producers and importers but they understandably acted in unison. A big market player almost doubled the price of DAP and others withdrew their stocks from the market.

The nail was hit on the head, and parliamentarians on the edge for being seen responsible for increasing utility and oil prices, lost their cool. Many belonging to rural constituencies were upset.

Mr Shoaib opposed the subsidy to fertiliser companies and advocated that these funds be used to protect the urban poor from the rising staple prices. He said that if farmers get fair return on time for their produce they can afford agriculture inputs on their own. “If one bag is used on one acre it can produce on an average up to 28 maunds of wheat. If we can get market price for our produce, farmers can well afford the cost of DAP with income generated”.

“There is a need for a closer look at the agriculture value chain and curb unethical practices of vested interests to let the market work and deliver both for producers and consumers”, another expert commented.

The logic and formula of calculating the subsidy was also questioned. It was pleaded that the subsidy was not passed on in full to the farming community for whom it was meant and a big chunk was pocketed by importers and local producers because of the blanket cover.

The spot price of DAP in the international market on October 16 was $1,000 per tonne or 20 bags of 40kg each combined. At the current exchange rate of Rs80 to a dollar, the price comes to Rs80,000 or Rs4,000 per bag. With other charges and overheads the commodity could reach buyers for Rs4,200 in Pakistan. At the rate of Rs2,200 subsidy per bag, the DAP should have been sold at Rs2,000 per bag but the price was fixed at Rs3,050, a hefty Rs1,050 more than that. It implies that half of the amount of the subsidy is actually directed towards fertiliser companies for no tangible reason.

Khalid Mir, GM Marketing of Engro, a major player in fertiliser market, told Dawn that the allocated subsidy was not for current imports but for stocks imported till September. He contested the figure of Rs4,200 and said that handling cost is about 15 per cent of the total, so a Rs4,000 bag in international market would be viable to companies at a minimum selling price of Rs4,600.

He, however, said that fertiliser was imported in July and August when the price was higher at $1,300 per tonne. He accepted that companies could also have stocks bought a year earlier when the price was as low as $500 per tonne.

Defending the rate of Rs2,200 subsidy per bag Mir said: “Inventories of gains and losses are not accounted for in the formula used to work out the subsidy”.

He confirmed that during July-August DAP prices were at their peak and these were taken as reference price to arrive at the subsidy rate. Mir also clarified that 3,050 was the rate for Karachi and the price of DAP in other cities would entail transport cost and be higher.

Minister for Agriculture Nazar Mohammad Gondal and Secretary Muhammad Ziaur Rehman were busy and did not respond to numerous calls. Qadir Bux Baloch, Agriculture Development Cimmisioner, ministry of food and agriculture, dispelled the impression that fertiliser companies will be allowed to guzzle major chunk of Rs27 billion subsidy.

“We are not a bunch of fools to let fertiliser companies rob the government. So far, we have not passed on even a penny and the subsidy would be delivered on case-to- case basis depending on proper scrutiny of import papers”, he responded from home in Islamabad.