Fertiliser sales halt amid subsidy uncertainty

Updated Jun 03 2020

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Due to reluctant purchasing by the farmers, substantial fertiliser stocks are stuck with the dealers. ⁠— Dawn/File
Due to reluctant purchasing by the farmers, substantial fertiliser stocks are stuck with the dealers. ⁠— Dawn/File

KARACHI: Sales of all fertilisers have stopped in the country in anticipation of the subsidy scheme and the benefit of the subsidy is losing its significance to the farmers due to delayed implementation, according to the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC).

The council sounded the warning in a letter sent to the Ministry of National Food Security and Research (MNFSR) on Monday.

The government approved a package on May 13 of Rs50 billion for the agriculture sector which includes a subsidy of Rs37bn on fertiliser prices with an impact of Rs925 per bag on DAP and Rs243 per bag on urea.

Currently, the 50 kg urea bag price is Rs1,643 while DAP price is around Rs3,415.

The industry has intimated that closing inventory of urea with the industry at the end of May 2020 was 1.12 million tonnes as against 400,000-500,000 tonnes in a normal year.

Due to reluctant purchasing by the farmers, substantial fertiliser stocks are also stuck with the dealers, FMPAC Executive Director, Brig (retd) Shershah Malik informed the MNFSR.

He said the Association had asked MNFSR that the process for direct disbursement of subsidy on fertilisers to the farmers may be expeditiously finalised in consultation with the industry to avert any disruption of supply chain due to the element of uncertainty while ensuring the desired impact of the package. Since, then there is no further word on how the package will operate.

Delay in the release of the package has deprived the farmers of benefit on Phosphatic and Potassic fertilisers at the beginning of Kharif and discontinuation of subsidy in October at the beginning of the next demand phase (Rabi) will lead to disturbance of balanced use of fertilisers.

The Punjab model of disbursement through scratch card/E-Voucher – if intended to target subsidy (farmers with 12.5 acres or less) – warrants registration of the small farmers, which is yet to be done by the other three provinces and will take time. Large numbers of landless farmers all over the country is yet another issue to ensure desired disbursement of the subsidy.

Putting a scratch card/E-Voucher in over twenty five million bags of Nitrogenous fertilisers in view of the current inventory with industry, besides dealers’ stocks is not possible, in the given environment. A similar difficulty is foreseen on the production lines, with a monthly production of over ten million bags.

Moreover, this process, however transparent, is likely to draw undue disparagement from certain quarters in the current environment.

In view of pending subsidy claims of Rs19.2 billion against previous Subsidy Scheme (2016-18) and approximately Rs35bn stuck up in GST refund, the fertiliser industry is not in a position to support any option of subsidy disbursement through the industry.

Due to the substantial price decrease after GIDC reduction, prices of nitrogenous fertilisers are already at an affordable level; therefore, no subsidy should be given on Nitrogenous fertilisers.

All subsidising efforts may be directed only towards Phosphatic and Potassic fertilisers. Subsidy focused on Phosphatic and Potassic fertilisers, will result in the balanced use of fertilisers over a longer period, resulting in better crop yields.

The fertiliser industry is already pasting subsidy stickers on the above products, supplied in Punjab and can manage similar stickers for other provinces as well in a shorter period of time. However, it is recommended that only one sticker must be issued at federal level to avoid operational complexities.

The government must ensure timely payment of proposed/revised subsidy amounts claimed by the farmers through scratch cards/vouchers/stickers in line with the spirit of the subsidy package.

With 90 per cent cotton crop sown, any further delay in the basal fertiliser application will have a detrimental impact on the yield, the challenge of poor quality seeds and locust attack notwithstanding. He urged for an early meeting with the representatives of the fertiliser industry, in order to finalise the plan by addressing the above explained operational difficulties.

The meeting held at the ministry, was chaired by Additional Secretary MNFSR ,where Economic Consultant Dr A. Ali Talpur presented the outline plan of subsidy through the provinces. Having discussed, the logistic difficulties involved in the management of such a huge stock in the warehouses across the Country and implication of short subsidy duration, it was concluded that it may lead to hoarding, the possibility of intended benefits not reaching the farmers. Thus the package may be restructured by diverting the entire amount to Phosphatic and Potassic fertilisers for a longer duration, extending into next Kharif. The ministry will take the provinces into confidence, before going back to ECC.

Published in Dawn, June 3rd, 2020