Farmers fear that the year is going to be an uncertain one for fertiliser for multiple reasons. The prime suspect is the handling of the LNG sector which determines its production. They also worry about its price which has not stabilised in the last couple of years and are concerned about the subsidy regime where the policy of deliberate confusion has ruled for the last two years.

The industry faced its own management issues last year. None of its plants went for their annual turnaround in 2020. It plans to overhaul four of them — one plant of Fauji Fertiliser, one of Engro fertiliser, Fatima fertiliser and Pak-Arab — during 2021, which means they will remain offline for 30 to 45 days this year. In production terms, it may cost around half a million tonnes, though the industry can make up for the loss if additional gas is provided to it during the non-shutdown period.

But can the government arrange for it? This remains a question mark, especially considering that two plants (DH Chemicals and Agri-Tech) were closed due to the paucity of gas in 2020.

The pricing regime is suspicious. The farmers’ benchmark, at least psychologically, was set by the last regime which sustained prices of urea at Rs1,400 per bag and diammonium phosphate (DAP) at Rs2,400 for a significant period through an elaborate subsidy mechanism. Now, the official urea price stands at Rs1,668 per bag but sells anywhere between Rs1,720 to Rs1,770. In the last few days, it dropped to Rs,700 only because it was no longer required and hoarders threw their stocks in the market. DAP, which (officially but not practically) carries a subsidy of around Rs1,000 per bag, still sells at Rs4,000 per bag, whereas it should have been at Rs3,000 per bag. So, farmers’ fear that the price of fertiliser will continue to be a pain in their neck in 2021, as it was in 2020.

They are equally worried about government policy which creates more confusion than it clears, coupled with its capacity to implement its promises. During the pandemic paranoia, the government came out with a Rs1.2 trillion Covid-19 plan. Out of it, one official source claimed Rs100 billion will go to agriculture but another put the figure at Rs50bn. Out of it, Rs32bn were claimed to be earmarked for fertiliser subsidy.

Punjab, however, has so far disbursed only Rs2.5bn billion with Rs1bn still outstanding in farmers’ dues. The federal government released Rs5bn more last Monday to partially meet the obligation and the money is in the pipeline rather than with the growers. This is the gap between claim and reality, creating a trust deficit and uncertainty about the government’s capacity, if not its intentions.

If farmers and other stakeholders are to be believed, all these factors will continue afflicting the fertiliser sector this year as well. How efficiently the government deals with these issues will finally determine how it actually turns to be. Till then, one can keep his fingers crossed.

Published in Dawn, The Business and Finance Weekly, January 4th, 2021