Fertilizer the ‘goldmine’

August 08, 2013



Pakistan is an agricultural country with approximately 70 percent of its population living in the villages. The major source of their livelihood is agriculture. Agriculture employed 66 percent of the total workforce in 1950-51 but by 1999-2000, this figure dropped to 47.3 percent and this trend continues. This shows that people are now not interested in farming. This decline indicates decreasing incentives by the government to the agriculture sector.

Even today when Pakistan faces acute economic crisis, its domestic food produce is the mainstay of economic survival strategy. The proposed agreement with Iran of barter of electricity with Pakistani wheat and rice is a perfect example. This productive sector of Pakistan now faces the challenge of increasing population, expanding cities and industrialisation spread out across productive land, reducing the agricultural land and forcing an increase in per acre yield.

The demand of increase in per acre production therefore becomes an important facet of agriculture in Pakistan which cannot be met without availability of cheap Fertilizer to farmers along with crop rotation techniques and other measures. Wheat production in Pakistan slid to 23.3 million tons in 2012-13, the lowest in four years and down from 25 million tons a year ago. Annual wheat demand in Pakistan is 26 million tons, which the country has not been able to achieve for quite some time, and this year experts estimate that total production will be around 23 million tons, which is three million short of current requirements and may hamper our barter agreement for electricity with Iran. Fertilizer prices and its availability play a huge role in constraining the use of fertilizer by small farmers which directly effects overall agri produce. In this backdrop, even working of options for preference of expensive import of fertilizer over domestic subsidy and facilitating the domestic producers under pretext of so called gas shortage is quite un-understandable phenomenon. The experts say that gas shortage is a misperceived slogan coined by the interested party to cover the unprofessional wastage and theft in the CNG and IPP sectors.

The fertilizer sector in Pakistan has not been able to get its due share in long term government policies . The trust reposed in Fertilizer sector by a government at one time has produced results. The private sector has come up with huge investment and its present infrastructure not only ensures sufficient cheap and good quality fertiliser for domestic use but has the potential to earn foreign exchange.

Pakistan can now produces about 7 million tons of urea per year which is more than 4% of the world’s urea (Nitrogenous) output but produces much under its capacity due to cuts in gas, all of which is consumed locally. By late 2000s, the gas demand had increased significantly with increased uses of gas in commercial and industrial activities. The major contributors are the transportation and power segments, which converted to gas from oil. In the current scenario, there has to be gas loadshedding to manage the gas supply to all the sectors.

Fertiliser, despite having priority allocation of gas (Natural Gas & Management Policy 2005), faced gas curtailment (up to 20%) for the first time in 2010 as gas was diverted to power plants. This limited gas supply to the fertilizer industry threatens the productivity of the largest sector of the Pakistan – agriculture. Presently domestically-produced urea prices are ranging between Rs 1600-1700 per bag and in case of import they cost Rs 2400 to 2600 per bag. The figure indicates that a subsidy of about Rs 700 .per bag is being passed by fertilizer sector to the farmers on the principles of open market operations.

In the process of domestic produce the government saves investment on foreign exchange and gets tax which it charges to domestic fertilizer industry. The tax paid by only one of the fertilizer producers Fauji Fertilizer Company in year 2012 was Rs 43.189 billion. However, rumours of further fertilizer gas cuts and doing away with the bulk purchase subsidy of approx Rs 220 per bag presently with fertilizer producers is being viewed with concern in the sector.

The principle of progress demands that you put more efforts on successful ventures rather than reinforcing the failures. The government failures of not being able to providing basic needs like electricity to its people must be weighed in comparison with the success of fertilizer sector in taking care of the food security for people of Pakistan. The important point which fertilizer producers make is that where gas is a replaceable fuel for IPPs being cheap against petroleum for fertilizer gas is feed which is processed to become urea. The experts consider fertilizer sector an efficient user with least losses and theft, the total gas allocation is just 818 MMCFD but they hardly get 600 MMCFD through MARI and SSGC network . The gas allocated at MARI Network is low MMBTU gas (inferior quality gas) which cannot be used for power generation or domestic consumption; hence this low mmbtu gas field is being utilised by domestic fertilizer plants saving it from being wasted. The fertilizer industry believes that using gas for producing urea is the most efficient and judicious usage as fertilizer sector is not just burning the gas to run the plants alone, it offers maximum value-addition by converting the raw gas into precious urea grains and the country hugely benefits from this substitution.

Having discussed above, the fertilizer sector still can play a role to help government come out of the present crisis but it requires mutual understanding of the stakeholders. The progressing nations put emphasis on productivity. In Bangladesh, the priority of power is first industry and then the domestic users. Where there is a need to check wastage in all sectors involved in waste of gas, a serious working will prove that if gas is provided to fertilizer to its capacity it can deliver. The export of fertilizer and its accumulated effects on agri produce will ensure sufficient budget support to the government. A support much beyond the requirement for the purchase of alternate fuel for the IPPs. Courtesy Business Recorder

Published in ZaraiMedia.com

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