CONTRARY to official claim that mining and quarrying represent an important economic activity, the sector performs poorly and is neglected.

The sector has been accorded the lowest priority in development plans, though vast mineral resources of diverse spectrum offer great potential for economic extraction, exploitation and utilisation.

Yet, the successive governments have failed to create enabling environment including needed infrastructure resulting in lack of development of a vital sector that provides various raw industrial materials.

Since 1990, the mineral sector contributes hardly half per cent to the gross domestic product (GDP) and the investment in the sector remains almost stagnant. Total revenue generated from the sector at national level is a paltry sum of about Rs450 million a year, as against potential of earning billions of rupees.

A case in point is the need for development of phosphate rock, an important non-metallic mineral. Extensive geological surveys have proved potential deposits of 26 million tons of phosphate rock, discovered in 1969, which can be exploited for industrial and commercial purposes.

In contrast, physical extraction of phosphate rock mineral, optimally in any year during the last decade, was to the insignificant level of 2,093 tons in 2000-01, which resulted in revenue income of Rs62,790 only.

Rock phosphate, a major source of phosphorous, is an essential element for plant and animal nutrition. It is used as an organic fertiliser in its raw form, and is the raw material for production of processed phosphate fertilisers, phosphoric acid and other industrial chemicals and animal-feed.

Currently, Pakistan has an installed capacity of one million tons for production of all types of phosphate fertilisers, though being operated at 60 per cent of installed capacity due to various factors. These, primarily, include di-ammonium phosphate (DAP), single super phosphate (SSP) and nitro-phosphate (NP) fertilisers.

Fauji Fertiliser Bin Qasim Ltd has an installed annual capacity of producing 446,000 tons DAP, whereas Hazara Phosphate Fertilisers Ltd and Lyallpur Chemicals & Fertilisers Ltd have a cumulative capacity of producing 180,000 tons of SSP fertiliser annually. Production capacity for NP fertiliser is at the level of 300,000 tons per year.

The total production of phosphate fertilisers however meets only 25 per cent of the total domestic demand, which is growing by about 10 per cent annually. The supply-demand gap is thus filled through imports. During 2004-05, approximately 600,000 tons of DAP was imported.

Even to meet the requirements of these industrial units, the feedstock is being imported, instead of extraction and use of indigenous phosphate rock. There exist two major phosphate rock types, namely dolomite ore containing low to medium phosphorous pentoxide (P2 O5) and siliceous ore containing medium to high P2 O5. The proven reserves, commonly known as Hazara phosphates, are estimated to be 14 million tons and 12 million tons of the respective ores.

A series of comprehensive studies on the phosphate rock deposits and the use of mineral were carried out over a period of last 20 years or so. Though a number of sources have been identified, main beds are located near the villages Kakul-Mirpur and Lagarban-Tarnawai and Serban Hill areas in Hazara Division. These are commercially exploitable deposits.

Low-grade phosphate, with 15-20 per cent P2 O5 content, is ideal raw material for production of SSP, a known product with an established market demand. Simple and cost-effective method is employed through compaction and granulation of phosphate rock. Adding other raw materials, such as limestone, dolomite, magnesite and others, which are available close to Hazara phosphate deposits, could produce a complete range of composite fertilisers. It is thus established that the use of indigenous phosphate for production of fertilisers is achievable and beneficial.

There are some 750,000 tons of phosphate rock of acceptable quality available at Kakul alone. This grade could be used, blended with imported high quality phosphate rock, to produce other phosphate fertilizers. Tarnawai deposits, of about two million tons, are of better grade and quality averaging 28.5 per cent P2 O5.

The quality and quantity of Tarnawai reserves thus meet the requirement of fertiliser industry and could absorb the cost of developing mines over the total tonnage eventually extracted. The two deposits, at Kakul and Tarnawai, are estimated to meet nearly 40 years’ demand for production of SSP fertilizer.

Phosphate rock mining remains focused at Kakul, district Abbottabad, whereas Tarnawai deposit is yet to be developed. An integrated Kakul phosphate-mining project was developed in 1985, basically to feed the SSP fertiliser-producing plant located in Hazara, which was designed to process local phosphate rock of Kakul and Tarnawai origins, to produce 90,000 tons of granulated SSP per annum.

The Kakul mine has produced and supplied some 270,000 tons of ground phosphate during its 10 years of operation. The mine operations however remain closed since 1996. A few private miners supply small quantities of phosphate rock to the plant.

With an installed crushing and grinding plant of 60,000 tons annual capacity at Kakul, an investment of about $10 million remains idle, having multiplier adverse effect on socio-economic conditions of the area. One of the issues resulting in closure of mine was disagreement on its price between seller Sarhad Development Authority and buyer National Fertiliser Corporation of Pakistan, which revolves around the analysis of the quality of rock phosphate i.e. the P2 O5 content.

There was possibly chemical problem too due to high silica content in the ore and other impurities, but technically it is not a limiting factor. In fact, lack of co-operation between the two state-owned organisations was the principal reason causing huge national loss. Due to inadequate and irregular supply of local phosphate rock, the fertiliser units resort to large-scale imports, primarily from Jordan and Morocco.

One of the key elements to increasing agricultural yield is better provision of fertilisers and seeds. Inadequate use of fertilisers and imbalance in the ratio of nutrients are major factors affecting the crop yield. Major phosphorous deficiencies exist in the soil due to under-fertilisation with phosphorous-containing fertilisers.

In a latest move, the government has now decided to disallow present subsidy on urea price and instead subsidise all the phosphate and potash fertilisers. Effective October 1st, 2006, this measure will dramatically reduce the market prices of phosphate fertilisers aiming to encourage their higher usage so essentially required.

The two SSP producing fertiliser units, namely Hazara Phosphate Fertilisers Ltd and Lyallpur Chemicals and Fertilizers Ltd, have been on privatisation list for long, after undertaking rehabilitation and re-commissioning of respective plants in 1999.

The Lyallpur plant was put on sale in 2002 without success and again in April 2006, whereas the Privatisation Commission in January 2006 invited the expressions of interest for Hazara Phosphate Fertilisers. The privatisation process of the two units however did not progress any further, presumably due to poor response from prospective buyers.

Learning from the past experience, it will be advisable not to sell these plants at this stage. Instead, plans may be devised to first develop indigenous resources for phosphate rock. Ideally, the Hazara Phosphate Fertiliser plant should be integrated with Kakul-Tarnawai mines, allowing a single ownership and management structure in the private sector or under public-private partnership. There are various factors in support of the proposal.

Responding to the economic and social needs, the development of national phosphate resources and optimising its use for production of fertilisers should be a priority objective of the government. Sadly, the National Mineral Policy 1995 has failed to give desired impetus to mineral sector and to attract investors, basically due to lack of political will and poor interaction among federal and provincial agencies.

Ironically, the prime minister chairs the Mineral Investment Facilitation Board constituted under the policy. New mining policy documents are under preparation, to be finalised by December 2006. One hopes that in view of minerals’ importance in achieving industrialisation, import substitution and export promotion, the policy will address the issues hampering its growth in the past.

Likewise, Fertiliser Policy 2001 has not been implemented effectively in so far as achieving self-sufficiency in fertilisers is concerned. The policy in vogue commits to progressively meet the entire demand of fertilisers domestically, at affordable prices. Indeed, there is a lot more to be done by the government to attain physical targets.