Farmers seek wider scope of fertiliser subsidyArchive
PAKISTAN Kissan Ithehad last week came up with some interesting facts about fertiliser subsidy. The subsidy amount on DAP used to be around Rs2,200 per bag till 2008 and came down to Rs300 in 2016.
Similar is the case of nitro-phosphate, which was subsidised by Rs950 per bag and single super phosphate (SSP) by Rs860 per bag till a few years ago, where now the subsidy has come down.
In 2015, when the PML-N government came up with its first subsidy package, DAP got only Rs500 per bag, nitro-phosphate Rs217 per bag and SSP Rs195 per bag. In the 2016 package, DAP got Rs300 per bag, nitro-phosphate Rs130 while the SSP was excluded.
Potash (fertiliser) has not figured in the package at all. All nitrogenous fertilisers have also been ignored, except for urea, which has received a subsidy of Rs400 per bag. Others varieties have not been included. The ammonium-nitrate was given Rs80 per bag, but the GST on it has not been reduced, from 17 to 5pc as promised, Ammonium-sulphate has also been completely ignored.
What makes the comparison more interesting is that Sikander Hayat Bosan has been heading the sector on both occasions. He was the federal minister for agriculture till 2008, when the huge subsidy plan was executed. Currently, he holds the charge of Federal Minister for Food Security and Research — still in-charge of the sector at the federal level. The subsidy amounts, however, differed wildly in both his tenures.
“The package has twin problems: non-professionalism in agricultural sense of bureaucracy, and the government’s inability to keep its promises,” says Khalid Khokhar of the PKI. Instead of considering the entire range of fertiliser based on one essential ingredient (phosphate and nitrogen), the bureaucracy is locked in semantics — looking for exact names that the prime minister used. It has only added to the farmers’ problems.
Despite repeated requests and explanations by the growers that all these fertilisers belong to the same family of one generic name, no one relents, they said, accentuating problems for farmers.
In his budget speech, the federal minister for finance had promised to sell DAP at Rs2,500 per bag, but local manufacturers and importers have now formally announced at least Rs200 higher than that. What should farmers do if the government cannot keep even those promises it makes in the parliament? the PKI chief wonders.
The PKI analysis has only pointed out a basic flaw of the official package, where the government, instead of committing a fixed subsidy amount, promised a fixed sale price, which it should have known it could not uphold due to market forces. Only 40pc of DAP is manufactured locally and the rest is imported. Global world prices fluctuate wildly — from $350 to $650 per tonne, depending on the global consumption at a particular point of time; the price averages around $500 per tonne. Right now, it is $340 per tonne, which according to the industry, means Rs2,660 per bag in the domestic market. The price will start rising shortly as global consumption begins to increase.
On the other hand, the subsidy amount is capped at two levels: per bag and total amount. It is Rs300 per bag, Rs125 each from federal and provincial governments and Rs50 relief from the industry. The other cap on subsidy is of the total amount, which is Rs11bn. Once the amount is consumed, the subsidy package will expire.
With total amount and per bag subsidy fixed, how the government could promise a particular sale price is anybody’s guess.
Urea is being sold at the officially promised price of Rs1,400 per bag only because the international prices have either been at par or lower than that. In the last instance, when the subsidy amount went up Rs2,200 per bag, the then government capped the sale price and let the subsidy amount fluctuate.
In the given situation, the PKI demands subsidy on potash fertiliser because of its role in soil health and on import of other phosphatic and nitrogenous fertlisers, especially the imported ones. Local manufacturers of these fertilisers don’t have as compelling a case because of less quantity of active ingredients and mixing of fertiliser to make one particular variety.
The government, on its part, thinks that world pricing trend was sliding and that it is still maintaining a low drift. At that point in time the world price of DAP was Rs2,850 per bag, which has only come down further in the last two months. The calculation was: Rs50 relief coming from the industry and Rs300 by the government. The government is still pressing the industry to provide its share of relief and cut its profits a bit.
The government, on its part, has devised an elaborate mechanism to ensure price through a robust monitoring mechanism so that whatever subsidy is announced, reaches the. It has already created a cell phone application, where companies and official monitors are uploading real time sale prices in different areas. Any dichotomy is immediately brought in the notice of the district administration, which moves instantly. As an additional layer, it has created tehsil, districts and provincial level complaint cells to monitor fertiliser prices.
That is why, both urea and the DAP are being sold at, or very close to, officially declared prices. As far as expanding the cover to smaller fertilisers is concerned, the government is in negotiation with farmers’ bodies and the industry to look into possibilities and mechanisms.
Published in Dawn, Business & Finance weekly, August 1st, 2016