Fertiliser smuggling

While the Ministry of Industries and Production has allowed private sector to import 300,000 tonnes of urea to meet the country's Kharif crop requirements, urea smuggling to Afghanistan, allegedly with the facilitation extended by some unscrupulous Customs officials at the border, continues unabated. This has had a "sieve effect" on the availability of this crucial agricultural input in the local market.
Another input being smuggled to Afghanistan is DAP. Hence the shortage of these essential crop nutrients in the local market, and its likely impact on our agricultural produce. Sources quoted in a Recorder Report have alleged that smuggling of commodities such as wheat and fertiliser continues along the porous Pak-Afghan border. At the same time legalised export of urea to Afghanistan is also continuing, though its exact quantity is not known.
Aside from lax border security surveillance, a major cause of smuggling is the huge urea price differential that exists in the local and international markets. For instance, urea price in the local market is below $200 per tonne while it is as high as $800 per tonne in international market.
As a result, smuggled Pakistani urea has established a sizeable presence as far away as the Central Asian Republics. Secondly, unregistered shipping of the commodity by foreign importers who are required to register the consignments with Customs authorities at the border, leaves the actual quantity allowed to be exported intact, obviously with the blessing of Customs authorities.
It should be mentioned here that anti-smuggling agencies such as Frontier Constabulary (in NWFP and Balochistan) and Customs at Pak-Afghan border are mandated to check smuggling of all types of commodities, but they have apparently failed to live up to the task assigned to them.
Smuggling has meanwhile not only caused prices in the local market to shoot up; it has also caused huge amounts of subsidy extended on agricultural inputs to go waste. The shortages caused by smuggling have further pushed up prices in the local market.
Unchecked smuggling of urea, DAP and other items is a very serious development that needs to be combated by the government with firmness and determination. There is already a huge demand-supply mismatch in the availability of these essential farm inputs that has to be met through expensive subsidised imports. For instance, the total annual production by the 10 existing major fertiliser units in the country stands at about 4.5 million tonnes, while the country's total urea consumption stands at about five million tonnes.
Urea consumption in 2005, for instance, was 5.1 million tonnes against its production of 4.3 million tonnes, and according to projections, the trend is going to persist over the next few years. The drain caused by smuggling has further eroded the supply position in the country, aided by the market forces, which are ever vigilant to capitalise on such situations.
The increase in urea consumption is meanwhile being attributed to the good prices of produce the growers are getting for their major crops, and the demand for fertilisers has increased in proportion to the growth of agriculture, which calls for restructuring of the entire fertiliser sector along scientific lines. It is said that there is a need to establish at least two more plants to relieve pressure on our fertiliser imports.
And it takes four to five years to set up a urea plant. This means that if work on installation of a plant is started immediately it will not be ready for production before 2012. And by then the gap between demand and supply will have gone up further. There is therefore a need for the government to adopt a holistic approach to the whole issue.
Viewed in the larger national security perspective, the clandestine routes smugglers use to take goods out of the country can also be used by anti-state elements to bring in material that can possibly be used in acts of sabotage, etc. The authorities should therefore ensure heightened vigilance at the borders.
Secondly, they should plug all procedural loopholes at the borders that allow smugglers of agricultural inputs to cause shortages in the country. Huge amounts of subsidy given on commodities that are later smuggled out of the country constitute a massive drain on our national exchequer. The government should act swiftly and firmly to stamp out all types of cross-border smuggling by revamping the entire Customs clearance and border security system.