Not often do you find consensus in the parliament on major issues, but the recently concluded session of the National Assembly saw the honourable parliamentarians united in the cause of amending the CCP ordinance. It is no coincidence that this move has come at a time when the Competition Commission of Pakistan (CCP) has been flexing its muscles - investigating cartels all around Pakistan, with fertilizer companies being the latest ones under scrutiny for alleged abuse of dominance.
The countrys top fertilizer makers are said to have been engaged in tying-in the sale of urea with DAP - meaning the buyer, in many cases a poor farmer, must buy a bag of DAP if he wants to purchase a bag of urea. Albeit, the evidence available with the CCP suggests that different companies tied-in the sales in different ratios.
The commissions report on the issue has been based on numerous complaints from all over the country that led to the investigations into the matter, resulting in show cause notices being served to fertilizer manufacturers, as the tying-in of sales is deemed illegal in the view of competition law. Although, the CCP acknowledges the difficulty in tracing the numbers to assert their findings, a look with a different angle surely deserves some attention. The CCP has investigated about three of the past crop seasons and found the companies involved in serious wrongdoings of tying-in the sale of urea with DAP. Naturally, there should be a noticeable difference between DAP off-take in sowing and harvesting seasons, which isn visible on the face of it.
What the numbers reveal is shockingly consistent with CCPs findings to a large extent despite their claim that the companies delay the invoicing of DAP sales in order to minimize the chances of tie-in sales practice being traced. The sales figures of the top three companies - FFC, FFBL and ENGRO - signal an improved urea-to-DAP ratio in the harvesting seasons rather than the sowing seasons.
This adds unnecessary burden on the farmers as they are forced to procure DAP along with urea regardless of whether they need it or not. Not only does this squeeze their pockets but also at times deprives them of even applying the much-needed urea to their crops, as dealers refuse to sell urea without selling DAP along with it.
For those who are unfamiliar with the science of fertilizer application, DAP is required at the time of sowing of both Rabi and Kharif crops i.e. during Oct-Dec and Apr-Jun respectively. The Rabi season of FY09 is largely irrelevant in this case as DAP sales during that period almost halted owing to a couple of reasons - including the delay in announcement of subsidy - and thus could mislead the findings.
Agonizingly still, urea to the end consumer reaches at considerably higher rates than what is reported in the monthly price list released by the NFDC. This is because the dealers have to follow the tie-in sales practice to maintain their margins and they cannot sell the DAP any expensive because the imported DAP is of better quality than the local one. This forces them to sell urea at higher rates to sustain their margins. This explains to a fair extent why farm yields haven improved despite all those subsidies and support prices. The unfair practice hasn only been hurting the farmers but has also been diluting the impact of government subsidy, paid by taxpayers money. Regrettably, however, the representatives of those taxpayers seem to be in cahoots with each other to amend the CCP Ordinance instead of strengthening it.
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Sowing season Sowing season Non sowing Non sowing
1 (Oct-Dec 2 (Apr-Jun season 1 season 2
CY08) CY09) (Jan-Mar CY09) (Jul-Sep CY09)
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Urea off take (in tons) 968,890 974,958 1,033,661 963,367
DAP off take (in tons) 310,345 201,580 396,011 248,693
Urea/DAP ratio 3.12 4.84 2.61 3.87
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Source: NFDC sales figures (FFC - FFBL -ENGRO)
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