The fertiliser industry has registered a 0.3 percent shortfall in output during July-March in current fiscal year as against a growth of 4.8 percent in the same period last year, according to a latest report of the State Bank of Pakistan (SBP).
The domestic price of fertilisers increased during FY07, reflecting the rising international prices and soaring demand while international urea prices, in particular, jumped 161 percent in March 2007 against July 2006, following the rapid increases in energy costs.
The subsequent increase witnessed in the international prices of DAP since January 2007 was even stronger, and forced domestic dealers to enhance the prices by the end of March 2007. So, as a result of the higher prices, fertiliser offtake dipped 9.1 percent year-on-year basis during July to March 2007 in contrast to 5.6 percent increase last year.
The fall is essentially due to declining urea offtake; the demand for phosphoric fertilisers was strengthened due to subsidy given by the government. The report highlighted that owing to the subsidy, and the government's media campaign to promote usage of a balanced mix of nutrients, DAP demand growth picked up substantially after subsidy announced in October 2006.
As a result July-March FY07 DAP offtake increased by 14 percent year-o-year basis compared to a rise of only 3.8 percent seen in July-March FY 06. So, the share of DAP in fertilisers offtake jumped to 27.5 percent in July-March FY 07 compared to 21.9 percent in the corresponding period last year.
The report showed that the temporary closure for maintenance and up-gradation, slow down in demand, untimely rains, and a considerable rise in the prices, mix of fertilisers and expectation of a subsidy announcement by the government are the major factors for decline in the production of fertiliser.
During the first nine months of the current fiscal year, the import of fertiliser also declined by 60.1 percent as against the 69.7 percent rise during the corresponding period last year, which reflects the slow down in demand for fertiliser during July-March in current fiscal year.
According to the report, within the fertiliser group, the decline in the production of non-urea fertiliser was more prominent with 3.8 percent in the first nine months of FY07 as compared with 6.4 percent growth in the same period last year, which may be due to the impact of the delay in the purchases of fertiliser by the farmers in anticipation of subsidy announcement during July-October in the current fiscal year.