FERTILIZER SUBSIDY IN PAKISTAN

Lt Gen. Munir HAFIEZ (Retired)

Fauji Fertilizer Company Ltd., Pakistan

Fauji Fertilizer Company Ltd.

93 Harley Street, P.O. Box 253, Pakistan
Tel: 92 51 9272301 - Fax: 92 51 9272519
E-mail: md@ffc.com.pk
 (content as provided for distribution in Melbourne)

All the papers and presentations prepared for the

2008 IFA Crossroads Asia-Pacific in Melbourne will be

compiled on a cd-rom to be released in December 2008.

FERTILIZER SUBSIDY IN PAKISTAN

Munir Hafiez
Chief Executive & Managing
g g Director
Fauji Fertilizer Company Ltd. Pakistan

CONTENTS

’ Brief History

’ Fertilizer Subsidy Regime

’ Outlook

1
CONTROLLED/ REGULATED PHASE
1955 - 1985
’ Regulated Fertilizer Prices

’ Controlled Farm Output Prices

’ Dominating Public Sector In
Manufacturing / Marketing / Import
’ Heavy Subsidies by Government of
Pakistan (GOP)
’ Provincial Quotas

DEREGULATION PHASE
1986 - 1995
’ Incentives
I ti For
F Private
P i t Investment
I t t

ª Guaranteed Return On Investment

ª Tax Holidays

ª Duty Free Import Of Raw Material /

Machinery

2
 DEREGULATED PHASE
1986 ONWARDS
’ Deregulation By GOP
ª Nitrogenous 1986
ª Phosphatic 1993
ª Potassic 1995
’ Increased Emphasis On Privatization of
Fertilizer Business / Manufacturing
’ Support Price For Major Crops By GOP
’ Quotas Abolished
’ Elimination of Subsidies
5

CHANGE IN INTL. FERTILIZER MARKET

IMPACT ON PAKISTAN: 2004 ONWARDS
’ Pakistan dependant on fertilizer imports to
supplement domestic production for meeting local
requirements.
requirements
’ Increasing international fertilizer prices oblige GOP
to consider subsidy on fertilizers.
’ Need for subsidy to:
ª Provide fertilizers to farmers at affordable
prices.
i
ª Promote balanced fertilizer use.
ª Maintain growth in agriculture sector.
ª Provide raw materials for local industry.
ª Ensure food security. 6

3
 RE-INTRODUCTION OF FERTILIZER
SUBSIDES
’ 2004: Increase in international urea price.
GOP intervenes,
intervenes resumes urea imports
itself & subsidizes difference between
domestic & international price

’ 2006: Steep rise in international

phosphatic & potassic fertilizer prices.
GOP allows subsidy to private sector on
domestic production & import of these
fertilizers also.

SUBSIDY ON FERTILZERS

* Budget figure
** Calculated on prevailing exchange rate

4
 FERTILIZER SUBSIDY - OUTLOOK
’ Two new urea manufacturing facilities expected
on stream in Pakistan during 2009 & 2010 after
which
hich no urea
rea imports will
ill be required
req ired in the
country.
’ Subsidy on urea likely to continue during 2009.
Total outlay will go down due to decrease in
international prices.
’ With the rapid decline in phosphatic fertilizer
prices subsidy on these fertilizers expected to be
eliminated during 2009.
’ Subsidy on potassic fertilizers likely to continue.

Thank You

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