Shortage of fertiliser may pose food inflation threat

Shortage of fertiliser may pose food inflation threat as it leads to reduction in per acre yield of major crops. According to experts' estimates the decrease in yield/production of crops due to 10 percent decline in urea off-take will be around 5 percent. Projected total production of rice for the year 2011-12 is 6.61 million tons, worth Rs 495.96 billion.
In this case the decline in production will be around 0.33 million tons. As per prevailing rice market prices, the value of this cutback would be Rs 24.80 billion, agronomists said. Fertiliser manufacturers told Business Recorder that gas curtailment and irregular gas supply has increased the cost of production of the fertiliser manufacturing companies which compelled them to increase urea prices in order to continue their business operations.
The short supply of gas has also led to severe shortfall in the local urea production. They said that the Federal Government has also imposed 16 percent GST on all fertilisers which has further increased the fertilisers' prices. Consequently, the cash-starved small farmers are not using fertilisers in accordance with the requirements of the crops. During January-June 2011 the short supply and higher prices of urea restricted its usage and urea off-take declined by 12 percent.
April-June 2011 witnessed 10 percent decline in urea off-take. This decrease in use of fertiliser will definitely affect the yield of major crops like wheat, cotton, rice and sugar cane, they warned. The gas curtailment will further aggravate the situation during the coming Rabi (wheat season) due to multiplied effect of decline in yield of kharif crops, lower availability and higher prices of fertilisers.
Ignoring other attributes the impact of fertiliser alone on coming wheat crop is assessed at Rs 29.70 billion. As the production target of wheat for the year 2011-12 is 25.0 million tons; therefore, five percent decrease in production will be 1.25 million tons, experts added.
Food market experts apprehend that to fulfil the requirement of local agro-based industry and the dietary needs of people, Federal Government will have to import wheat next year. A huge amount of foreign exchange will be required for this purpose. Similarly if the declining trend in cotton prices prevails the situation will further worsen as the farmers would not be able to get fair prices of their produce.
Furthermore, significant earnings of Pakistan's foreign exchange comes from export of rice and under prevailing situation the exports of rice will fall leading to a major cut in foreign exchange earnings. The increase in the inputs cost means less income of the farmers and increase in the prices of commodities for general public.
In addition, reduction in production of crops due to lower usage of fertilisers will further compress the small farmers' investment in the crops; thus a vicious circle of poverty will begin, affecting the economic conditions of the farming community and low-income groups for the years to come.
Experts say that the prices of basic food items have already significantly increased during the last few years which have lowered food consumption of low-income groups. The decline in the crop production and subsequent increase in their prices would further aggravate the situation and may drastically increase the food price inflation leading to inevitable social upheavals.
They emphasised that the food security can be ensured by adequate and smooth/ regular supply of fertilisers at affordable prices. Therefore the government should restore regular gas supply to the fertiliser plants and make an arrangement that the fertilisers are available to the farmers at affordable prices.
Meanwhile the Kisan Board Pakistan (KBP) Central Secretary General Malik Muhammad Ramzan Rohari has warned that the farmers are going to protest against the anti-agriculture policies of the government after Eid-ul-Fitr. He warned that unaffordable increase in the agriculture inputs like, fertilisers, tractors and other implements would destroy the agriculture sector.