20000106

Fertiliser policy

imposes substantial hidden

costs on farmers

ARSHAD AWAN

KARACHI: Pakistan's fertiliser policy imposes substantial hidden costs on farmers, including cost associated with searching for scarce supplies, panic buying, and depressed yields because of uncertainty about fertilizer availability, experts said on Tuesday.

"Phosphates are rarely delivered in time or in sufficient quantities, resulting in an imbalance between nitrogen and phosphate use: although the recommended ratio is close to 1:1 for most crops, the ratio in Pakistan is at best 3:1," Iqbal Yousaf, agro-economist, said.

Yousaf said though phosphate imports have been late year after year, the government has failed to respond to the problem.

Ali Usman, an analyst with Canada-based Agro Development Organisation, said Pakistan's fertiliser pricing policy has also had harmful intersectoral effects because natural gas prices are held below world prices to reduce the price paid by farmers for fertiliser.

"Such a pricing policy reduces the availability of gas for use in industry. In an energy-deficient country like Pakistan the policy represents an expensive way to offset agricultural pricing policies," Usman said.

Yousaf said the benefit of a liberalised input market was evident from the extraordinary growth in pesticide use after the subsidy was ended in 1979-80 and entry to the market was liberalised.

"Indeed, widespread use of pesticide is generally believed to explain the dramatic growth in cotton yields in the 1980s," Yousaf said.

Usman said nominal rates of protection can be adjusted to take account of the fact that price and trade policy will make tradable inputs cheaper (or more expensive) than their free-trade prices (the rate of effective protection).

In the past fertiliser, pesticides, and machinery were subsidised and a favourable price regime was created for tractors.

Since the late 1970s and early 1980s, when Pakistan eliminated subsidies on most tradable inputs, the subsidy effect of traded inputs has diminished; by the early 1990s rates of effective protection differed little from the rates of nominal protection.