Fertiliser manufacturers hike prices despite stable gas subsidies

ISLAMABAD: Fertiliser prices in Pakistan have been edging alarmingly higher in recent months, panicking farmers despite the government maintaining subsidies on natural gas, a key feedstock for production, it is learnt.According to industry sources, some fertiliser manufacturers receiving subsidised gas have quietly increased urea and other fertilizer prices.

These price hikes, they vehemently claim, are aimed at matching the prices of imported fertilisers, potentially squeezing the profit margins for poor farmers and the government seems to have lost its control over these hikes, severely impacting farmers and crop yields.

Rising costs of essential fertilisers are weighing down hard on farmers, despite the lack of corresponding increases in production costs. The subsidised gas, intended to keep fertiliser prices low, has not prevented manufacturers from raising prices, exacerbating the financial strain on the agricultural sector.

Industry experts and farmers alike are calling for stronger government intervention to regulate fertiliser prices and protect the agricultural industry from further economic distress. The rising costs threaten to decrease crop yields, potentially impacting the broader food supply chain.

At one time, fertiliser-makers had asked the government to grant the sector a ‘deregulatory environment’ and permission to export surplus for which they are even willing to forego the subsidized gas supply. They did this to earn nearly a billion dollars, as they had less cost locally while internationally the price was high.

Agriculture, a key contributor to Pakistan’s GDP, is under strain as rising urea prices are affecting crop yields and inflating production costs. Over the past year, the price of this crucial agricultural input has surged by over 55 percent, according to the Pakistan Bureau of Statistics (PBS).

In late April, fertiliser manufacturers unilaterally increased urea prices by Rs550 per bag, prompting the government to intervene and demand a rollback, despite no increase in gas prices for the industry. However, the manufacturers did not reverse the price hike, and the product continues to be sold at high prices, posing a significant challenge for farmers.

PBS data indicates that as of the week ending May 23, 2024, the prices of various fertilisers have increased by up to 55.3 percent compared to the same week last fiscal year, potentially hindering agricultural growth.

Sona Urea prices increased by 55.3 percent to Rs4,803/bag, Calcium Ammonium Nitrate by 51.65 percent to Rs4,270 and other Urea (Tara, Sarsabz, Shandar etc) prices increased by Rs4,681/bag. Similarly, Nitro Phosphate price increased by 35.7 percent to Rs7,699/bag and Dia Ammonium Phosphate (DAP) by 13.66 percent to Rs11,393 a bag.

Farmers are urging the government to take stronger action to control fertiliser prices and support the agricultural sector amid these rising costs.

High input prices are forcing many poor farmers to leave their fields uncultivated or use fewer than needed fertilisers, resulting in consistently low yields. Despite having the world’s largest canal irrigation system, Pakistan’s average crop yields rank poorly globally — wheat 9th, rice (paddy) 14th, sugarcane 14th, seed-cotton 11th, and maize 18th.

Financial challenges for farmers have worsened as the government has increased power tariffs for agricultural tube wells, exacerbating the impact of rising fertiliser prices. Both electricity and fertilisers are crucial for crop yields, and their increased costs are likely to further harm agricultural productivity.

For several years, the agriculture sector has struggled to perform adequately, leading to financial hardships for farmers and threatening agricultural growth. The situation is expected to further deteriorate as the increased costs of key inputs continue to strain farmers’ finances.