Ghulam Ahmad
Urea is a widely used nitrogen fertilizer that plays a crucial role in supporting agricultural
production and food security in Pakistan. The country has a significant domestic
production of urea, with several manufacturing plants located across the country. In 2023,
the fertilizer industry faces a challenging situation as the opening stock of urea stands at
a drastic figure of 2 lakh tons that was alarming for the planners so the anticipated
production for the entire year is projected to be 6.2 million tons depending upon
continuous production, summing up to a total of 64 lakh metric tons. On the other hand
both LNG based plants of Urea “DHL and Agritech” remain closed for 100 days each due
to suspended gas supply. Once again there is a gap of 6 lac tons due to robust growth
witnessed in the agriculture sector, which has driven the demand for urea to 7 million tons
per year.
This significant gap between supply and demand has resulted in a noticeable shortage,
casting a shadow over the agricultural landscape and highlighting the urgent need for
strategic solutions to ensure an adequate and sustainable supply of this vital agricultural
input. The agricultural sector’s complexity is very obvious, as the demand for urea soaring
due to trending urea consumption & practices like double rice cropping in a single season,
which necessitates additional applications of urea-based fertilizers such as Arri 6 and
Super. Here are some recommendations based on current circumstances to overcome
the upcoming challenges:
1. The urea manufacturing industry in Pakistan is currently facing an uneven playing
field, as different manufacturers receive different rates for feed gas and power. This
has led to disparities in production costs and prices, with some plants struggling to
stay afloat while others enjoy significant benefits. Uniform gas prices for all plants,
coupled with a stable supply that ensures operations for an entire year, can play a
pivotal role in promoting industrial and agricultural sustainability.
2. The current gas subsidy granted to Urea manufacturing plants has raised concerns
about its effectiveness in benefiting the farming community & this subsidy system
should be promptly discontinued because farmer is still buying expensive urea from
market. Redirecting these resources towards more direct and efficient support
mechanisms for farmers could lead to a more equitable and impactful agricultural
policy, ultimately benefitting the backbone of our agricultural sector. One proposed
solution is to redirect these subsidies towards the production of other essential
fertilizers like phosphate. Additionally, stretching the urea price to align more closely
with international rates could help deter smuggling. This shift could result in a fairer
distribution of resources within the agricultural sector, discourage black-market
activities, and promote sustainable agricultural practices.
3. Maintaining a buffer stock equivalent to 10% of the annual fertilizer demand can be a
prudent strategy to mitigate price volatility, ensure a steady supply during planting. seasons, and address any unexpected supply disruptions. This approach can also
provide a safety net for farmers and help stabilize the agricultural sector.
4. The government has recently boarded an embarking journey to revive barren lands,
aiming to convert them into fertile and productive agricultural hubs. In this start up,
they should recognize the crucial importance of timely management and distribution
of essential agricultural inputs to empower farmers. Furthermore, the government
have to launch a comprehensive agriculture policy containing unveiling of new fertilizer
manufacturing plants to overcome the shortage & to strengthen domestic production
and reduce dependency on imports. This policy will not only enhance the livelihoods
of farmers but also strengthen the agricultural sector, ensuring sustainable growth and
food security for the nation. By prioritizing these initiatives, the government is taking
significant strides towards a more prosperous and resilient agricultural landscape.
5. The Government of Pakistan should prioritize timely imports of phosphate, in doing
so, it should consider classifying phosphate as an essential item to streamline the
importation process and ensure it is readily available to farmers when needed.
Additionally, it is crucial for the banking sector to extend its support by facilitating the
financing and logistics involved in phosphate imports.
6. The recent imposition of 5% GST, 5% federal excise duty, and 3% value added taxes
on DAP fertilizer in Pakistan has a significant impact on the prices of the commodity.
These taxes have extended the price Rs. 12,000/- per bag of DAP fertilizer that may
led to concerns about decrease in its consumption resultantly drop in crop yields and
an increase in the cost of food.
7. The temporary halt in the import of phosphate in Pakistan due to international market
conditions, shortage of dollars and the production slowdown by FFBL is indeed a
serious cause for concern. Particularly as the upcoming Rabi season approaches and
Phosphate is a critical component in wheat sewing, and its availability is essential to
ensure successful crop yield. To maintain a sufficient stock of phosphate for the
upcoming season and support the agricultural sector, it is crucial for relevant
authorities to resume import operations promptly. Timely action in this regard will help
ensure that farmers have access to the necessary fertilizers, contributing to the
nation’s food security and the prosperity of the agricultural community.
8. Putting an end to the harassment of fertilizer dealers is of paramount importance for
the smooth functioning of the agricultural sector. Fertilizer dealers play a crucial role
in ensuring that farmers have access to essential agricultural inputs, and any
harassment they face can disrupt the supply chain and hinder farmers’ ability to
access these vital resources. Harassment can come in various forms, such as
unnecessary regulatory hurdles and unfair treatment. To support the agricultural
industry and promote food security, it is vital that authorities take immediate action to
halt such harassment.