DAP import suspended by fertilizer importers

The fertilizer importers have announced to suspend import of DAP due to non-payment of over Rs 5 billion subsidy by the federal government. Industry sources said that huge outstanding amount of subsidy prevent the DAP importing companies from more import of DAP fertilizer that may engender shortage of DAP fertilizer in Pakistan for the sugarcane and corn crops that are sown in the months of February and March. Around two months are required to arrange fresh imports. Out of 2.2 million tons of DAP off takes during current financial and around 64 percent was supplied to farmers through imports.
The government had announced a subsidy of Rs 300 per bag on DAP import and it was the government's commitment that the subsidy claims would be paid within 15 days of the receipts.
The Ministry of National Food Security & Research (NFS&R) is delaying the forwarding of subsidy claims of the importers of DAP fertilizer to State Bank of Pakistan (SBP) and presently, importing companies' subsidy claims of around Rs 5.1 billion are pending for all imported DAP sales of private importers (other than producers) from September to December 2016.
According to a letter sent to the Finance Minister Muhammad Ishaq Dar by the Fertilizer Imports Council (FIC), the fertilizer importers have done their best to participate in the subsidy scheme and assist the government in its objectives by selling imported DAP fertilizer at subsidised price in the hope of being refunded by the government within 15-day of sales as envisaged under various notification.
However, for unknown reasons, subsidy claims amounted to Rs 5.1 billion of four months is pending in clear violation of the subsidy notification F.No. 1-11/2012/DFSC-II/Fertilizer dated August 23, 2016, they claimed in letter.
"These huge pending subsidy amounts are not allowing fertilizer imports to continue business anymore, therefore we have been forced to stop further import as a result of blocked subsidy cash flow," FIC said. FIC has requested Finance Minister to urgently intervene and ensure immediate release of pending subsidy to SBP for payment to importers, so they can resume the import of DAP, in order to avoid shortage.
Industry sources said that presently, only one shipment of 40,000 tons DAP imported by a fertilizer producer, is in pipeline that will reach by end of this month. They said that the subsidy amounting billions of rupees of the DAP of the fertilizer producers is also in pending for last few months.
A week earlier, FIC also approached Prime Minister for payment of DAP subsidy and latter Ministry of Food Security arranged a meeting that was cancelled. Sources said that the total consumption of DAP fertilizer in Pakistan was 2.2 Million tons during the calendar year 2016 and with better water availability and higher demand for agricultural crops DAP demand will be increased to 2.3 million tons in 2017.
During last calendar year, around 1.4 million tons were imported and the remaining 0.8 Million tons was locally produced. To make matters worse, the local production remains suspended this month due to restricted gas availability, they informed.
According to industry sources, DAP fertilizer demand in Pakistan is seasonal. The first DAP season is during the months of February and March. These two months see an increase in DAP application by the farmers on Sugarcane and Corn crops. The Sugarcane crop is expected to be sown on much larger acreage during this year, while the demand for Corn crop is also expected to be higher. The higher acreage for Sugarcane and Corn crops will result in higher demand for fertilisers during February and March. Specially, DAP fertilizer will be in high demand on these crops, they mentioned.