The government has refused to give subsidy on import of potash fertilizer, over and above the existing subsidy amount earmarked in the budget, sources in the Ministry of Food and Agriculture (Minfa) told Business Recorder.
Minfa has submitted a summary to the Economic Co-ordination Committee (ECC) of the Cabinet seeking Rs 500 million on import of potash to promote balanced use of fertilisers, after the Finance Ministry issued no-objection certificate to the proposal. According to Minfa summary, availability of potash in the country is zero, whereas the required quantity is estimated at 50,000 tons.
Sources said that the ECC was informed on December 15, 2009 that to check serious depletion of essential nutrients from soil and to ensure soil fertility, balanced use of urea, di-ammonium phosphate (DAP), phosphate and potash fertiliser is required to be promoted.
The recommended composition/ratio of fertiliser use in Pakistan for nitrogen (N), phosphatic (P) and potash (K) is 2:1:0.5. Farmers are heavily biased in favour of nitrogen-based fertiliser, mainly due to lower prices of urea as compared to DAP and potash. In the past, the government had subsidised DAP to the tune of Rs 250 per 50 kg bag in 2006-07, Rs 470 in 2007-08 and Rs 2200 in 2008-09. Resultantly, a phenomenal increase of 40 percent in the offtake of DAP was witnessed, which had positive effect on crops production.
The ECC was further informed that to keep the price level of sulphate of potash (SOP), muriate of potash (MoP) fertilisers at par with DP fertiliser ie Rs 1,910 per bag, a subsidy of Rs 500/50kg bag (Rs 10,000 per ton) has been estimated. Minfa proposed that subsidy should be fixed, and import of 50,000 tons of potassic fertilisers during the current financial year be arranged.
It is estimated that total subsidy on 50,000 tons of potassic fertiliser will be around Rs 0.5 billion. To promote efficient use of potassic fertilisers by farmers and to cap the price of fertiliser at Rs 1,910/50 kg , Minfa proposed to: (a) provide subsidy of Rs 500/50 kg on the import of MoP/SoP to keep the price of potash at the level of Rs 1900.
The total financial impact involved would be around Rs 0.5 billion; (b) provide the subsidy on first come first served basis, subject to the achievement of the set target (ie 50,000 tons) and be admissible to only those importers who import between 1st of July, 2009 and 31st of March, 2010; (c) allow State Bank of Pakistan to monitor and withhold the issuance of Letters of Credit (LCs) on the achievement of set target ie 50,000 tons; and (d) to allow importers a subsidy on submission of import documents to SBP .
Sources said that the ECC deliberated on the issue in detail and endorsed the proposal but with the condition that no subsidy would be provided over and above the amount already sanctioned in the budget which implies that Minfa has to re-appropriate the subsidy. It is pertinent to mention here that the current C&F price of potassic fertilisers SoP and MoP has been quoted at $500, or Rs 42,000, per ton at the prevailing exchange rate.