1. Why the shortage of chemical fertilizers is a concern?
According to the Ministry of Agriculture and Livestock Development (MoALD), the annual requirement for chemical fertilizer is about 0.6 million tonnes (The Kathmandu Post, 2021). Being one of the major contributors to agricultural GDP, annual paddy cultivation solely requires 0.12 and 0.05 million tonnes of urea and DAP respectively. However, Agriculture Input Company Limited roughly estimates the requirement for fertilizer over 1.1 million tonnes. These differences in data reported by essential stakeholders responsible for the supply of fertilizer across the country have limited the understanding of the actual gap between demand and supply.
For the fiscal year 2020/21, only 0.4 million tonnes of urea were supplied (The Kathmandu Post, 2021). The government allocated Rs. 10 billion for the purchase of fertilizers in the year 2020/21 while Rs. 8.99 billion was spent on fertilizers during the previous year. Despite the fact that the annual fiscal budget for the purchase of fertilizer is increasing, the woes of farmers are still the same.
Shortage of fertilizers has added an extra worry to farmers who are currently brawling with drought, landslide, and crop failure. Due to the rapid increment in irrigation facilities, farmers cultivate three to four crops per year. Similarly, the introduction of high-yielding varieties requires a significant amount of fertilizer to supplement nutrients. In 2020, the fertilizer consumption of Nepal was 102 kg/ha while 87.3 kg/ha in the previous year reported a 16.85% increase. But, a meager supply of fertilizer reduces the production and ultimately affects the calorie requirement of the population. Low and untimely supply leads to price hikes in fertilizers. Reduced production increases imports and the inflation of edible produce simultaneously. As a result, the vicious cycle of poverty continues with the low income of farmers, and food insecurity hits the country.
2. What causes the shortage of chemical fertilizers?
Shortage of urea is a result caused due to multifaceted factors. Nepal does not have domestic fertilizer production plants and hence import occurs through formal and informal mechanisms. Insufficient fertilizer imports to meet demand is one of the major factors resulting in the shortage.
In February 2022 Russia launched an invasion of Ukraine which greatly affected the international market of chemical fertilizer. Russia, a major producer of nitrogen, phosphorus, and potash fertilizer has limited the export of fertilizer due to internal legislations and war-based sanctions.
Fertilizers imported from India, China, Turkey, Egypt, and Gulf countries undergo six months-long procedural requirements to finally reach border depots. Likewise, AICL’s delays in the bidding process, tender submission process, administrative inefficiencies, and inexperienced fertilizer supplier stretches the duration between import and supply.
The provincial government of Nepal distributes urea to each province based on the calculated requirement of cultivable land. At the ground level, the local government is responsible for the supply of fertilizer to the farmers either through the official dealers of Agriculture Input Company Limited (AICL) or Salt Trading Corporation Limited (STCL). Under the government mandate, Salt Trading Corporation Limited (STCL) has imported and distributed subsidized chemical fertilizers since 2017. However, its low import volume makes AICL the sole enterprise supplying fertilizer throughout the country. The inefficiency of AICL to fulfill its responsibility in due time affects the entire chain of distribution.
Co-operatives play an integral role in fertilizer distribution throughout the country. Currently, 5,300 co-operatives and co-operative shops are working as retailers of fertilizer. If the demand from co-operatives is not adequate to meet farmers’ needs or they do not distribute the fertilizers efficiently then farmers are the ones to torment. This, unavailability of fertilizers in time compromises the nutrient requirement of minimum 3 crop cycles viz. paddy, wheat, vegetables, and spring paddy.
3. What can be done to reduce the shortcomings?
Nepal’s Agriculture Input Company Limited and India’s Rashtriya Chemicals and Fertilizers have signed a commercial agreement to supply fertilizer under a government-to-government arrangement. However, lengthy legal hurdles to sign the agreement between the two parties always eventuate. This can resolve through pre-planned negotiations and the shortening of procuring process.
According to the National Fertilizer Policy (2002), buffer stock must be maintained at 20 percent of the calculated fertilizer requirement per annum. The MoALD has planned to create a buffer stock of 25,000 to 30,000 tonnes of fertilizers in each province. However, the implementation of plans must be hastened to tackle the shortage of fertilizer.
In February 2022, the Bagmati Province Government decided to set up three fertilizer factories at different places in the province in cooperation with a Thai company. Furthermore, the terms of the agreement proceeded with Nepal Electricity Authority (NEA) to ensure continuous power supply to fertilizer factories (myRepublica, 2022). For the establishment of such fertilizer plants within the country, legal and financial assistance for the encouragement of joint venture investment are indispensable.
The data regarding the fertilizer requirement of the country is outdated and no further research is conducted for the estimation. Smuggling through porous borders has resulted in massive inaccuracy in the calculation of fertilizer requirements of the country. A report by USAID suggests that 70% of fertilizers consumed in Nepal are smuggled which also raises a question on smuggled fertilizer quality (The Kathmandu Post, 2021). Similarly, quota-based provincial allocation of fertilizer according to the land area under cultivation should be amended with considerations of factors like varietal need, soil characteristics, and climatic influences. Hence, research activities must be accelerated to facilitate the remediation of the fertilizer crisis.
The price of fertilizers has increased three to four folds within a year. Hence, to provide subsidies in fertilizers without affecting consumption, budget allocation is to be increased with the early projection of inflation and fertilizers requirement.
The government has heavily subsidized fertilizers viz. 65-70% subsidy on urea, 25-30% on DAP, and 30-32% on potassium. Consequently, farmers emphasize fertilizer application based on subsidies rather than crop requirements. Unmanaged application of fertilizer increases farmers’ demand. This adds an extra burden to the national economy as import increases to meet the requirement. Thus, farmers’ awareness on the subject is to be boosted.
The capacity of AICL should be enhanced in terms of human, technical, and physical resources as it is solely responsible for fertilizer supply and distribution in the country. Lengthening the distribution channel with the involvement of multiple stakeholders must be reduced to expedite farmers’ access to fertilizers on time.
Materializing both the short and long-term solutions to solve the problem of fertilizer shortage is of utmost necessity. Prioritizing an on-time supply of fertilizers along with subsidization is equally important.
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