The Fertilizer sector in Bangladesh- Dr. Mohammad Jahangir Alam

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The Fertilizer sector in Bangladesh- Dr. Mohammad Jahangir Alam

  1. 1. Fertilizer Marketing, Distribution and Pricing in Bangladesh Mohammad Jahangir Alam, PhD Associate Professor Department of Agribusiness and Marketing Bangladesh Agricultural University Mymensingh-2202, Bangladesh E-mail: alambau2003@yahoo.com Presentation prepared for the International Conference ‘Agricultural Transformation in Asia: Policy Options for Food and Nutrition Security’ -ReSAKSS-Asia Organized by IFPRI in partnership with Cambodia Development Resource Institute 1 This presentation is a part of contribution of CASEED with IFPRI- Dhaka Apsara Angkor Resort & Conference Center Siem Reap, Cambodia; September, 2013
  2. 2. 2 Introduction  Chemical fertilizers contributed significantly to the increase of crop production in Bangladesh  Soil health has deteriorated in recent years due mainly to imbalanced use of fertilizers  Urea is used in disproportionate/over dosages, while TSP & MoP are used in much lower dosages than the requirement  Imbalanced use of chemical fertilizers is a consequence of lack of appropriate knowledge of the farmers regarding the crop specific dosages  Fertilizers are sometimes unavailable to farmers due to  Unavailability of required fertilizers in time  Higher price &  Defective distribution system
  3. 3. 3 Rationale of the study  Perspective Plan (GoB, 2012) envisages a growth rate of GDP to 8% in 2015, and to provide reduction of unemployment & poverty  To achieve this growth agriculture must grow by at least 4- 4.5%/year (MoA, 2010).  This is presumably possible through an increase in agricultural productivity based on balanced use of modern yield increasing inputs.  BUT since the country has experienced repeated sadness in the distribution & marketing, the government made some changes in polices & reorganized marketing & distribution system  Thus, fertilizer availability, its prices & subsidies remain important for the policy makers
  4. 4. 4 Objectives of the study Keeping in mind the crucial issues the study was undertaken with the following objectives: 1. To review of production, import, distribution, marketing & pricing system of fertilizer in Bangladesh 2. To assess fertilizer allocation & distribution procedures and its availability at farm level 3. To determine resource poor farmers’ accessibility to fertilizer use
  5. 5. 5 Data and Data Collection  Reviewed existing rules, regulations and policies  Key Informant Interviews: With officials of MoA, BCIC, BADC, DAE along with dealer`s representatives, farmers representatives & officials of local administration  Focus Group Discussion: Farmers, traders and concerned officials  Case Studies: Dealers, retailers & private sector importers for understanding of the distribution system  Consultative Workshop at Dhaka: Opinions of various stakeholders involved in fertilizer distribution, policy making, implementing & monitoring of fertilizer distribution
  6. 6. 0 500 1000 1500 2000 2500 3000 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Consumption('000mt) Urea TSP MOP Figure 1 : Consumption of fertilizer (`000 m. tons) 6
  7. 7. 7 Table 1 : Growth rates of fertilizer consumption (1984-85 to 2011-12) Year Total Consumption Urea TSP MoP 1984/85-2011/12 4.17 4.24 1.80 7.12 1984/85-1994/95 6.34 6.75 -33.31 2.39 1984/85-1989/90 8.05 8.31 5.46 8.97 1990/91-1994/95 3.65 5.57 -74.69 0.59 1995/96-1999/00 1.22 0.92 2.35 1.099 2000/01-2004/05 4.37 3.28 2.84 1.95 2005/06-2011/12 1.35 0.70 3.44 7.54  Consumption growth was the lowest during the years of intensive intervention in the distribution system in recent years (1.35%)  Rate was the highest during the OMS of the late eighties (8.05%)
  8. 8. 8 Figure 2: Percent contribution of soil and fertilizer on rice yield  In 1985-86, fertilizers contributed 36% to the total soil fertility where as in 2002-07 it increased to 40%  Indicates the degradation of soil fertility over time
  9. 9. Figure 3 : Domestic production of fertilizers (`000 m. tons) 0 500 1000 1500 2000 2500 Production('000mt) Urea TSP 0 200 400 600 800 1000 1200 1400 1600 Import('000mt) Urea TSP MOP Figure 4 : Import of fertilizers (‘000 m. tons) 9
  10. 10. 10 Figure 5 : Quantity of urea produced & imported by BCIC (2006-12)  Urea production & import in Bangladesh is solely controlled by BCIC  In recent years, the quantity of urea produced by BCIC has declined, while the quantity imported increased significantly imposing a pressure on foreign currency reserve
  11. 11. 11 Table 3 : Liberalization of fertilizer sector at a glance Fertilizer Marketing and Distribution Year Areas of reform Measures 1992 Privatization of import Government excluded fertilizers from the list of restricted imports & allowed private sector to import. Subsidy was withdrawn completely & importation & distribution was made open 1995 Reversal of urea marketing policy OMS experienced a setback in 1995 with severe urea crisis. Government decided to bring the market under its direct control to mitigate the crisis 2006 Price intervention Subsidy on imported fertilizers introduced 2008 Reform in dealership Provision was made for appointing at least 1 dealer in each union 2009 Appointment of sub-dealers Provision for appointment of 3 sub-dealers in each union was made. Farmers’ register, distribution card & distribution register was introduced 2010 Open sale Fertilizer distribution card & distribution register are no longer required 2012 Heavy subsidy Subsidies on TSP, MoP & DAP were introduced
  12. 12. 12 MoA DAE DFSMC UFSMC PSI- GodownBADC -GodownBCIC-Godown Fertilizer Dealers Retailers Farmers Figure 6: Present structure of distribution channels of fertilizer
  13. 13. 13 Fertilizer Pricing and Subsides  Ministerial committee fixes common sales prices of different fertilizers  On Dec. 1992, explicit subsides on fertilizers were totally removed. Later, due to a sharp increase in world prices, subsides were reintroduced in 2006  Currently, the amount of subsidies are higher in all types of fertilizers imported from outside the country or produced domestically at home Year/Date Urea TSP MOP DAP 1st June/2011 - Till date 20 24 October/2010 - Till Date 22 15 27 02 November/2009 - 23 October/ 2010 22 25 30 14 January/2009 - 1st November/2009 40 35 45 1st November/2008 - 13 January/2009 80 70 90 10 June/2008 - 31 May/2011 12
  14. 14. 14 Table 4: Fertilizer-Paddy price ratio & the ratio of domestic to world prices Year Fertilizer-Paddy price ratio1 Ratio of domestic to world prices of fertilizer2 2004-05 0.65 0.48 2005-06 0.71 0.46 2006-07 0.87 0.57 2007-08 0.77 0.47 2008-09 1.02 0.31 2009-10 0.76 0.58 2010-11 0.65 0.49 2011-12 1.21 0.47 1. Based on average retail price of fertilizers & average growers’ price of paddy 2. Based on average retail price of fertilizers & average import parity price, weighted by consumption of different types of fertilizers
  15. 15. 15 Subsidy on Fertilizer  Currently the government subsidy on fertilizers accounts for about 6% of total public expenditure  Lead to an “inefficient” allocation of resources (farmers may use much of fertilizers due to its low price)  Poor farmer, who use sub-optimal dose of fertilizer due to its high pricing & liquidity constraint, has the justification to get fertilizer subsidies  BUT Large farmers may lose this ground  Universal subsidies given for fertilizers are distorting prices and draining out scarce government fiscal resources
  16. 16. 16 Table 5: Subsidy on fertilizer by 0rganization (Crore Taka) Year PSI BADC BCIC Others Total 2007-08 242.77 150.78 3193.60 308.56 3895.71 2008-09 483.53 287.88 4273.53 381.54 5426.48 2009-10 682.67 1347.98 1978.78 912.80 4922.23 2010-11 1693.86 1245.95 2697.25 62.93 5699.99 2011-12 3825.17 2547.23 5036.68 47.61 11456.68 Total 6928.00 5579.82 17179.84 1713.44 31401.10 36% 20%15% 29% TSP DAP MoP Urea Figure 7: Subsidy on Fertilizer by commodity(%) (2011-12)
  17. 17. 17 Resource poor farmers accessibility to fertilizer use  1/3 of small & marginal farmers use fertilizers in their crop fields. Use more urea & TSP than MoP and DAP.  Percentage of farmers experiencing deficit in fertilizer use is higher in these categories than in other categories  Main reason for such deficit was the lack of cash to purchase fertilizer  Such findings make a strong case for targeted cash subsidy to small farmers instead of universal subsidy
  18. 18. 18 Table 6: Regulations & gaps identified relating to fertilizer marketing & distribution Policy/ Regulations Gaps identified Fertilizer dealer appointment and fertilizer distribution related coordinated policies-2009 1) Distortion is created in fertilizer market and pricing by public interventions 2) Existing GOB fertilizer distribution system & regulations often impedes the private dealers from effective operations & does not serve farmers in remote areas Fertilizer demand assessment of GOB 1) The GoB fertilizer demand assessment is centrally determined and is not need based Import restriction of fertilizer 1) Monopoly import of urea fertilizer 2) BADC and private importers import the required quantity of TSP, MoP and DAP from different countries and sources 3) Import of fertilizers fully depends on MOA's allotment & permission
  19. 19. 19  Distortion of fertilizer marketing & pricing need to be corrected through progressive liberalization of the system  Monopoly of BCIC in urea import should not be continued & longer in future. In this case, a public-private partnership may be useful  Annual fertilizer demand should be assessed very carefully. A bottom-up method of demand assessment should be followed depending on total cropped area, cropping pattern, cropping season and fertilizer requirement per unit of land Way forwards

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