Pakistan’s fertilizer sector: Structure, policies, performance, and impactsThe fertilizer industry in Pakistan, with US$3.74 billion per year in sales, now stands at a crossroads where, after an initial substantial contribution in boosting crop productivity, its future potential is being challenged. Fertilizer-responsive crop varieties, supplementary irrigation water, and a favorable policy environment in Pakistan have induced fast growth in fertilizer demand. On the supply side, the availability of gas at low prices along with a favorable investment environment resulted in the buildup of excessive manufacturing capacity. But recently, a shortage of gas and monopolistic behavior has led to underutilization and greater imports. Restrictive laws put fertilizer processing and marketing in a few hands, which has also affected its efficiency. Moreover, the yield response of fertilizer has tapered off and per hectare use is fast reaching its optimal level. The existing policy environment leads to higher costs, inefficient use, and a heavy burden on the government as it charges one-fourth of the market price for feedstock gas used in fertilizer manufacturing. In addition, the government imports urea and absorbs the difference in international and domestic prices. |
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agricultural algebraic modeling system Appendix Table average based on NFDC Billion PKR capacity consumers cost Cotton crop production DAP Tons decrease diammonium phosphate Distribution subsidy domestic fertilizer domestic prices domestic production Domestic supply Engro equation equilibrium displacement model exogenous Factory price Fauji Fertilizer Company feedstock Fertilizer Bin Qasim fertilizer industry fertilizer manufacturing fertilizer market fertilizer nutrient fertilizer prices fertilizer production fertilizer sector gas subsidy HDIP hectare Herfindahl-Hirschman Index high import elasticity higher IFPRI/IDS impact import elasticity scenario inclusive GST increase input international prices International Resource Group irrigation Islamabad kg/ha low import elasticity natural gas nitrogen offtake output prices Overall Pakhtunkhwa Pakistan Pakistan's fertilizer Pakistani rupees percent phosphate phosphorus PKR/ton price elasticity price of DAP price of urea production subsidy Punjab Research revenue Billion PKR rice sales tax SFRI Source supply of urea thousand tons Total urea and DAP urea Tons variables wheat yield response