As the Rabi season is around the corner, farmers are about to start preparing their lands for the seasonal crops, the most important being wheat. However, the farming community is apprehensive about the availability of fertilisers, particularly urea compost, keeping in view the bitter experience of last year.

In the previous Rabi season, they had to stand in long queues in towns and cities away from their lands to lay their hands on a couple of urea bags at much higher rates than the officially notified ones.

The uncertain fertiliser situation, skyrocketing costs of compost and other farm inputs, and the widening gap between the profit margin of wheat as compared to maise and rice are making the growers turn towards alternative crops. The tendency may jeopardise national food security.

The area under wheat has already shrunk by 2.1 per cent from 9.168 million hectares to 8.976m ha last year, and stakeholders fear that it will further drop this season because of the reasons mentioned above. Wheat is the highest consumer of urea in Pakistan, where it is also used as a substitute for the costlier diammonium phosphate (DAP).

A decline in fertiliser usage will also impact the per-acre yield of the wheat crop, leading to a grain shortage and a growing dependence on expensive food imports

A decline in fertiliser usage will also impact the per-acre yield of the crop. This will lead to a grain shortage crisis and a growing dependence on expensive food imports.

Some experts say that a 5pc drop in nitrogenous compost will cause 3.94pc or over 1.04m tonnes of losses in wheat production if the 2021 crop year is taken as the baseline when Pakistan had harvested 26.37m tonnes of grain.

However, with an inventory of 250 to 300 kilo-tonnes and the government’s decision to import 200kt nitrogen fertilisers, the fertiliser industry is satisfied with the urea outlook and doesn’t see any imminent crisis, unlike the last year, as all urea-manufacturing plants are operational.

“Urea supply will remain stable to meet the Rabi season demand,” say sources in the industry. Unlike last year, the supply of gas (the major urea ingredient) continues to all the plants, including those based on indigenous gas and those that run on regasified liquefied natural gas (RLNG).

But, they are not sure about the prices of the compost. “As the government intends to increase gas prices, the industry will be compelled to transfer its impact onto the end-consumers,” says a senior official of a fertiliser manufacturing unit. “Nothing concrete may be said right now about the price as a committee headed by (former prime minister) Shahid Khaqan Abbasi is yet to take a decision.”

However, he says that the industry has no capacity to absorb the gas price hike and hints that if the government enhances gas tariff at a rate conveyed to the industry, the price of each 50kg urea bag may go up by Rs500 depending on the market situation.

The official is critical of the government’s intentions of recovering the line losses of gas companies from the fertiliser industry by increasing the tariff of the fuel. He argues that 99pc of the gas to the fertiliser manufacturers is being supplied from the Mari gas field, which cannot be diverted to other sectors because of its quality issues, and they are already paying for it more than its wellhead costs.

Regarding apprehensions of smuggling to neighbouring countries, especially Afghanistan, as had been alleged during the last Rabi season, he brushes aside the accusations. “Afghanistan consumes only 250,000 tonnes of urea per annum, with a peak consumption of 400,000 tonnes in 2020, per UN’s fertiliser consumption data. With this consumption, he says Pakistan’s fertiliser market cannot be disturbed as it has 700,000 tonnes of excess urea production capacity”.

He says that the increase in prices may, however, address the smuggling issue that results from the difference between local and international fertiliser prices. An increase in local prices will reduce the profit margin for the smugglers.

He holds the government responsible for last year’s mayhem in the urea market. The government mismanaged the issue by conducting raids on small-time dealers running businesses in towns and villages with neither licences nor proper cash memos for issuing receipts to the buyers.

“These shops were in a radius of a couple of kilometres for each farmer. When the authorities sealed these on frivolous charges, the growers turned to main dealers in major cities and thus, long queues were seen there.

“Then the revenue department officials, patwaris, etc, issued parchees to their favourites or those who would grease their palms for obtaining urea bags. Also, some people like daily-wagers and motorcycle-rickshaw drivers found it an opportunity to earn extra money by joining the queues, buying some urea bags and selling the same with a premium in their respective villages.”

The situation normalised only when the government gave a free hand to the market forces to balance the supply and demand.

Published in Dawn, The Business and Finance Weekly, October 11th, 2022