The Fertilizer sector in Pakistan- Mubarak Ali
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The Fertilizer sector in Pakistan- Mubarak Ali

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The Fertilizer sector in Pakistan- Mubarak Ali The Fertilizer sector in Pakistan- Mubarak Ali Presentation Transcript

  • Pakistan’s Fertilizer Sector: Structure, Institu tion, Performan ce and its Impact Dr. Mubarik Ali CEO, Punjab Agricultural Research Board (PARB) September 20, 2013
  • 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
  • Urea Production Share by Firm Source: National Fertilizer Development Corporation, Engro Pakistan 38% 8% 33% 7% 1% 7% 6% Urea Production share Fauji Fertilizers (Goth Machi) Fauji Fertilizers (Bin Qasim) Engro Fatima Pak Arab (Multan) Agri Tech (Mianwali) Dawood Hercules (Skp) Only FF produces DAP
  • Urea and Phosphate Market Share by Firm 44% 9% 27% 6% 9% 5% Urea Market share Fauji Fertilizers National Fertilizer Marketing Ltd. Engro Fertilizers Dawood Hercules Reliance Group Source: 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.
  • Yield Response of Fertilizers Source: Soil Fertili Research Institute 1500 2000 2500 3000 3500 4000 4500 5000 0 40 80 120 160 200 240 Yeild(kg/ha) N levels (kg/ha) Fertilizer (Nitrogen) Requirements of Wheat in Irrigated Areas 230 2000 2500 3000 3500 4000 4500 5000 5500 0 40 80 120 160 200 240 Yeild(kg/ha) P2O5 Levels (Kg/ha) Fertilizer (Phosphorus) Requirements of Wheat in Irrigated Areas 190 1000 2000 3000 4000 5000 0 40 80 120 160 200 240 Yeild(kg/ha) N level (kg/ha) Fertilizer (Nitrogen) Requirements of Wheat in Barani Areas 14090 Optimum 1000 2000 3000 4000 5000 0 40 80 120 160 200 240 Yeild(kg/ha) P2O5 Levels (Kg/ha) Fertilizer (Phosphorus) Requirements of Wheat in Barani Areas 160 60 Optimum 140 Optimum Optimum Maximum Maximum Maximum Maximum 100
  • International vs. Domestic Prices Source: National Fertilizer Development Corporation 0 0.2 0.4 0.6 0.8 1 1995-96 2000-01 2005-06 2010-11 $/kg Nitrogen 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1995-96 2000-01 2005-06 2010-11 $/kg Phosphorus
  • International Competitiveness Source: National Fertilizer Development Corporation, OGRA, Planning Commission of Pakistan 0 100 200 300 400 500 600 700 $/ton Urea Prices International prices Domestic Prices Domestic prices+charges Domestic prices+subsidy Domestic prices+charges+subsidies Subsidy on Feed Gas during 2011-12 = Rs. 59 b
  • Possibility of Regional Trade 0 50 100 150 200 250 300 350 400 450 500 $/ton Subsidized Retail Price 0 100 200 300 400 500 600 $/ton Unsubsidized retail price
  • 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
  • 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 (+)
  • 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
  • Soil Depletion Source: Soil Fertility Research
  • Declining Fertilizer Use Efficiency 0 5 10 15 20 25 30 35 40 1980-81 1990-91 2000-01 2010-11 Kgproductionperkgoffertilizeruse Ratio of Yield/ fertilizer use Wheat Rice Cotton Source: NFDC
  • 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
  • Thank you!