This document summarizes a presentation on fertilizer marketing, distribution and pricing in Bangladesh. It discusses how chemical fertilizers have contributed to increased crop production but also led to soil health deterioration from imbalanced use. It outlines objectives to review the country's fertilizer production, import, distribution and pricing systems, as well as farmers' accessibility. The presentation covers fertilizer consumption trends, subsidies, distribution channels, pricing policies and identifies gaps such as distortion from public interventions and monopoly import control of urea. It recommends progressive liberalization of the fertilizer system and a shift to need-based, bottom-up assessment of annual fertilizer demand.

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
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
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
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
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. 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
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
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. 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
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
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
MoA
DAE DFSMC
UFSMC
PSI- GodownBADC -GodownBCIC-Godown
Fertilizer Dealers
Retailers
Farmers
Figure 6: Present structure of distribution channels of fertilizer

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
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
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
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
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
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
 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