Using fertilizer is an important method of increasing agricultural production and productivity, and therefore, the Agriculture Perspective Plan (APP)—which is in its final phase of implementation—has identified fertilizer as one of the four major production inputs for increasing crop productivity. Fertilizer is expected to contribute 64 to 75 percent of the total envisaged agriculture growth target of the APP.
Efficient use of fertilizer not only plays a direct role in increasing production but also enhances efficiency of other inputs like irrigation and seeds. Theoretically, all governments in Nepal, after the restoration of democracy in 1990, accorded a very high priority to boosting agricultural production through greater fertilizer usage, increasing efficiency in the fertilizer sector and regional balance in the availability of fertilizers. In reality, however, the supply of fertilizer has always remained short and the situation this year is even more critical.
Although Nepal started importing inorganic fertilizers from the early 1950s, it has no fertilizer manufacturing plant and all its inorganic fertilizer supply is imported. Fertilizers are currently imported in Nepal from the following four sources: KR2 program with financial support of the Japanese government; import by the Agriculture Input Company Limited (AICL); formal import by private importers and informal import by the local traders.
Various surveys conducted in the past (ASPR in 2000/2001 and OPM in 2001/2002) estimated fertilizer usage ranges from 56.0kg to 58.0kg nutrient/hectare. But if we consider only the amount of fertilizer imported from formal sources for calculating per hectare use of fertilizers, it would be less than 30kg. This clearly indicates that about 50 percent fertilizer used in Nepal is imported from informal sources, which is both illegal and unreliable. Therefore, ensuring an adequate supply of fertilizer to farmers in the country has always been a challenge for the government.
The government has, however, changed fertilizer policies several times in a bid to ensure a smooth supply of fertilizers in the country. In this context, the government has recently re-introduced a subsidy on 25 percent chemical fertilizers of the total requirements. This new subsidy policy is now being implemented and the percentage of subsidized fertilizers is gradually increasing every year.
Nepal’s fertilizer supply growth rate is negative while the demand growth rate is over 15 percent (approximately) every year. AICL is meeting only 20 to 25 percent of the present demand of fertilizers in Nepal. Private importers have almost given up this business because of their inaccessibility to subsidy. Hence; there is a glaring gap between the projected demand and supply of fertilizers. The average supply gap is reported to be around 46 percent. In order to reduce this gap and make fertilizers available to farmers in time, some measures are imperative.
First of all, a realistic assessment of demand is necessary to make fertilizer supply effective and regular. Medium and long term demand assessments are helpful for perspective planning, while short-term assessments are needed for immediate requirement. The medium term demand estimate should be done on a rolling plan basis with an annual review/adjustment by experts representing different disciplines and taking into account current and expected agriculture development plans. For long term demand assessment (10-20 years), a demand survey needs to be conducted every five years, collecting information from primary and secondary sources.
Further, Nepal should initiate a fertilizer trade treaty with the SAARC countries to make fertilizer a free trade commodity in south Asian countries. The Nepal government should also take immediate action for medium term trade agreement (5-7 years) with supplying countries for regular and reliable supply.
In order to make use of economy of scale, public and private importers should make joint purchase orders. This helps reduce import costs by a considerable amount. Policies to ensure timely issue of foreign exchange are required for facilitating smooth fertilizer imports. Moreover, private traders should be involved in subsidized fertilizer trade. At present they are not included in the import and distribution of the subsidized fertilizers.
Being a land locked country, Nepal has to import all its fertilizers via India. Presently, Kolkata and Haldia are the only ports allowed to import fertilizers for Nepal. Both ports are congested and ports charges are very high. The Nepal government should, therefore, negotiate with the Indian government to allow Paradeep and Vizag ports to import bagged and bulk fertilizers in Nepal through Jogbani, Raxaul, and Nautanwan railway stations. Port and agency charges should be kept under constant scrutiny and compared with charges in other similar ports.
Internal transport, warehousing and handling charges are important cost components. In order to keep the costs low, the government should improve infrastructure—mainly roads, telecommunications and electricity.
Fertilizer increases production and enhances the efficiency of other inputs, but ensuring an adequate supply has always been a challenge.
As demand for inorganic fertilizers is increasing, Nepal should immediately take initiatives to establish a fertilizer plant in the country based on a feasibility study. The recent MOU between two relevant ministries for providing 100 MW of electricity for a fertilizer plant is a noteworthy initiative taken by the government in this regard.
Finally, equity investment in fertilizer manufacturing plants of neighboring countries could be another suitable step. The National Fertilizer Policy (2002) has a provision for such investment.
To conclude, the bottom-line is that Nepal must now step up its initiatives and measures to meet the growing demand for fertilizers and ensure a smooth supply so as to boost the agricultural sector, on which a majority of the population depends.
The author is former chairperson of the AICL Board and a fertilizer expert