The Fertilizer sector in Pakistan- Mubarak Ali
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Pakistan’s Fertilizer Sector: Structure, Institution, Performance and its Impact
Dr. Mubarik AliCEO, Punjab Agricultural Research Board (PARB)
September 20, 2013
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Overview of the sector
Value of fertilizer: USD 3.8 b
# Processing firms: 8 Production
Capacity:10 mt N = 3.80 m t
(66.7%) P = 0.786 m t
(55.4%) K= 0.017 m t
(58.8%) Off take in m t
(Imports) N – 3.206 (27%) P – 0.633 (46%) K – 0.021 (71%)
DAP, NP, SSP
Urea
CANSource: National Fertilizer Development Centre
Per ha Availability (kg): N = 123 P = 27 K = 1
NPK Ratio Actual: 1:0.15:008 Desired: 1:0.5:0.25
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Urea Production Share by Firm
Source: National Fertilizer Development Corporation, Engro Pakistan
37%
8%
33%
7%1%
7% 6%Urea Production share
Fauji Fertilizers (Goth Machi)Fauji Fertilizers (Bin Qasim)EngroFatimaPak Arab (Multan)Agri Tech (Mianwali)Dawood Hercules (Skp)
Only FF produces DAP
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Urea and Phosphate Market Share by Firm
45%
9%
27%
6%
9%5%
Urea Market share
Fauji Fertilizers
National Fertilizer Marketing Ltd.
Engro Fertilizers
Dawood Hercules
Reliance Group
AgriTechSource: National Fertilizer Development Corporation, Engro Pakistan
The above diagram indicates the share of imported P which was 46% during 2011-12. Remaining 54% is marketed by FFC.
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Yield Response of Fertilizers
Source: Soil Fertility Research Institute
0 40 80 120 160 200 2401500
2000
2500
3000
3500
4000
4500
5000
Fertilizer (Nitrogen) Require-ments of Wheat in Irrigated
Areas
N levels (kg/ha)
Yeild (
kg/h
a)
230
0 40 80 120 160 200 2402000
2500
3000
3500
4000
4500
5000
5500
Fertilizer (Phosphorus) Re-quirements of Wheat in Ir-
rigated Areas
P2O5 Levels (Kg/ha)Yeild (
kg/h
a)
190
0 40 80 120 160 200 2401000
2000
3000
4000
5000
Fertilizer (Nitrogen) Requirements of Wheat
in Barani Areas
N level (kg/ha)
Yeild (
kg/h
a)
14090Optimum
0 40 80 120 160 200 2401000
2000
3000
4000
5000
Fertilizer (Phosphorus) Re-quirements of Wheat in Barani
Areas
P2O5 Levels (Kg/ha)
Yeild (
kg/h
a)
16060
Optimum
140Optimum
Optimum
MaximumMaximum
Maximum Maximum
100
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International vs. Domestic Prices
Source: National Fertilizer Development Corporation
1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 20
0.2
0.4
0.6
0.8
1Nitrogen
$/k
g
1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 20
0.20.40.60.8
11.21.41.6
Phosphorus
$/k
g
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International Competitiveness
Source: National Fertilizer Development Corporation, OGRA, Planning Commission of Pakistan
1995
-96
1997
-98
1999
-00
2001
-02
2003
-04
2005
-06
2007
-08
2009
-10
2011
-12
0
100
200
300
400
500
600
700
Urea Prices
International pricesDomestic PricesDomestic prices+chargesDomestic prices+subsidyDomestic prices+charges+subsidies
$/t
on
Subsidy on Feed Gas dur-ing 2011-12 = Rs. 59 b
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Possibility of Regional Trade
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
0
50
100
150
200
250
300
350
400
450
500Subsidized Retail Price
$/t
on
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
0
100
200
300
400
500
600Unsubsidized retail price
$/t
on
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Regulatory Environment
Regulated under the Essential Commodity Act (ECA), amended in 1973
Granted complete power to controllers to implement the Act Resulted in barriers to entry:
Concentration of industry in few hands Big investment is required to compete
Support Services: NFDC collects data, bring stakeholders together, formulate
policies SFRI conducts long term fertilizer experiment by crops and eco-
regions, tests new materials and develop their standards, helps farmers to adjust fertilizer doses, and help regulators through test and reference labs
Availability of credit
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Empirical Findings of Demand Estimation
Dependent variable: Fertilizer use for N and P (kg/ha)
Major factor Price Elasticity:
N: -0.17 P: -0.004
Other significant demand determinants: Presence of irrigation water (+) Farm size (-) Education (+) Access to off-farm income (-) Fertile soils (+)
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Issues in Fertilizer Sector Too much regulation Restrictive rules have created cartel in processing and
marketing Abnormal profits, especially during shortage period Public sector control on urea imports (mismanagement
creates shortages) Gas shortage creates 35% underutilization of capacity Uncertain supply increased operational cost No mechanism of transferring gas subsidy to farmers Fertilizer subsidy affecting whole Free Trade Regime Suboptimal NPK ratio promoted through subsidy on N Emphasis on more rather than efficient use of fertilizer N use is fast reaching to the optimal level No innovation in developing new efficient products Efficient methods of application has not been explored Resource degradation induced by intensification Declining fertilizer use efficiency, profits, TFP growth
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Soil Depletion
Source: Soil Fertility Research Institute
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Declining Fertilizer Use Efficiency
1980
-81
1982
-83
1984
-85
1986
-87
1988
-89
1990
-91
1992
-93
1994
-95
1996
-97
1998
-99
2000
-01
2002
-03
2004
-05
2006
-07
2008
-09
2010
-11
0
5
10
15
20
25
30
35
40
Ratio of Yield/ fertilizer use
WheatRiceCotton
Kg
pro
du
cti
on
pe
r kg
of
fert
iliz
er
use
Source: NFDC
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Recommendations
Processing Gas distribution proportionate to capacity and modernization Gas subsidy only in high int’l price situation, with clear mechanism of how
to reflect it in prices Clear gas schedules
Marketing Relaxation of rules to allow small companies in marketing Deregulation of imports and Govt. out from marketing even if it is only for
imports. Clear standards and their implementation for new products, such as
manures, micronutrients, etc.
Use in Production Develop efficient fertilizer use and application Test and promote efficient and environment friendly fertilizer products More responsive crop varieties Computer-based models to determine fertilizer use according to land
resources
Stocks Specified stock of fertilizer preserved to be released for crisis period
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Thank you!