Thursday June 30, 2022

Record jump in DAP price nullifies impact of govt’s subsidy on fertiliser

July 29, 2021

LAHORE: The price of di-ammonium phosphate (DAP) fertiliser has jumped to a record high of Rs6,000 per bag, fully nullifying the impact of Rs1,000 subsidy announced by the government within a few months, industry officials said on Wednesday.

The ascending price of DAP, which is one of the important nutrients after widely used urea fertiliser, will further imbalance its use due to growing disparity with other chemical fertilisers. With low application, the DAP is already being used disproportionately by local farmers due to its high cost.

The government announced a Rs1,000 subsidy on 50kg bag of DAP last year, which was echoed by the Prime Minister Imran Khan himself on April 26, 2021. When Rs1,000 subsidy was announced last year, it provided 25 percent saving to farmers against the then price of Rs4,000 per bag.

In the meanwhile, its price too has jumped by roughly Rs1,000 to nearly Rs6,000 per bag since February 2021, neutralising the impact of a similar amount of subsidy announced by the government within the six months. Now farmers can only claim about 16 percent subsidy on DAP bag as it price jumped to Rs600 per bag.

However, owing to procedural delays, the Economic Coordination Committee of the cabinet only approved the proposal of subsidy on DAP fertiliser for Kharif crops of cotton and rice about a week back while sowing time of these crops has already been lapsed.

Engro Corporation has increased price of 50kg DAP bag to Rs.5767 following recent upsurge in its price in the international market.

A senior official of Fertilizer Manufacturers of Pakistan Advisory Council FMPAC said "yes there is rising trend in the DAP market and the price is touching Rs6,000 per bag but this is inevitable since international DAP price has almost doubled over the last one year". "Phosphorus acid price has also increased in line with DAP price."

Official of fertiliser industry stressed that the govt needs to put in more subsidy, as dollar/rupee parity is further worsening the situation.

The price of DAP is said to be highest in country’s history nowadays while it is also costlier than what farmers of neighbouring India has to pay. In sheer contrast, price of subsidized DAP in India stands at Rs2,615 in Pakistani currency against around Rs5,000 per bag rate in Pakistan after applying Rs1,000 per bag coupon-based subsidy announced by PTI government.

It is a matter of fact that the price of DAP has been very volatile globally in the last about an year or so due to multiple factors. As Pakistan totally depends on imports for meeting its requirement, fluctuating international prices are almost entirely passed on to farmers.

Market insiders warned that a bullish trend in the international market means further escalating rate of DAP is on the corner. They feared that another Rs500 hike in DAP price is possible in a fortnight or so. They called for further upward revision in DAP subsidy by the government. "The government must at least double the subsidy amount, from Rs1,000 to Rs2,000 if it really wants to motivate farmers for its usage." they said.

The hike in fertiliser subsidy was more of a ceremonial nature as it gives very low monetary incentive to farmers. It certainly falls short of the premise that the DAP subsidy will encourage farmers to continue to use vital soil nutrients despite the rise in global prices.

Citing a study, they said, farmers’ decisions on how much fertilizer to use for a specific crop, are linked with farm nutrient's price as well as the commodity rate. Higher fertilizer prices combined with lower crop prices can cause farmers to use low rates of fertilizers. They acknowledged that the government has increased wheat price significantly and sugarcane and cotton growers also got better prices. However, the benefit of higher rates of farm produce has been countered with rising input cost.