ISLAMABAD: Pakistan’s fertilizer sector has raised serious concerns over the recently published Competition Commission of Pakistan (CCP) report on the fertilizer industry, citing multiple analytical flaws and omissions.
According to stakeholders, the report presents a narrowly framed, competition-focused evaluation that overlooks fundamental structural, strategic, and national security issues—particularly regarding natural gas allocation, which underpins the entire viability of urea production in the country.
The CCP report aims to assess market dynamics and concentration within the fertilizer sector. However, the industry argues it fails to address the core challenge of natural gas allocation, which is essential for urea production. “Urea is a gas-based product—its economics, viability, and even existence depend on the allocation of indigenous gas at viable tariffs,” industry representatives stated.
Fertilizer sector: CCP targets cartelisation
According to the industry, the report treats gas allocation superficially, primarily as a subsidy issue, and does not analyze it in the context of: (i) policy discontinuities; (ii) diversion of gas to other sectors; (iii) the unsustainable economics of LNG-based urea production; and (iv) long-term investment planning tied to gas supply certainty.
This omission, stakeholders claim, distorts the investment narrative and undermines understanding of the sector’s operational and financial realities.
The industry also criticized the report for under-appreciating Pakistan’s strategic achievement of urea self-sufficiency, which provides several critical national benefits: (i) guaranteed availability of urea at stable prices, even during global supply disruptions; (ii) post-subsidy domestic urea prices significantly lower than international levels, benefiting millions of farmers; and (iii) annual import substitution of over 6 million tons, saving billions in foreign exchange; and (iv) insulation from volatile global fertilizer markets during food security crises.
“The CCP report does not give the domestic fertilizer industry due credit for ensuring food security and supporting Pakistan’s agricultural base,” the industry noted.
Another key criticism centers on the report’s lack of recognition for the fertilizer sector’s significant investment in gas infrastructure, including: (i) long transmission pipelines from gas fields to plants; (ii) grid connectivity for plants supplied through the national gas grid; (iii) capital expenditure for purifying low-BTU gas; and (iv) infrastructure development for newly discovered gas sources and pressure management.
Despite highlighting “subsidies” on gas, the CCP report fails to acknowledge the reciprocal infrastructure investment made by the industry—investments which are critical.
The industry also challenged the report’s assumption that urea could be viably produced using imported LNG without subsidies. It pointed out that the current weighted average cost of gas for local fertilizer producers is already higher than in major urea-exporting countries, such as Qatar, Saudi Arabia, Iran, and Russia. LNG-based urea production, it said, would push prices well beyond competitive levels, potentially leading to: (i) increased agricultural input costs; (ii) higher inflation; (iii) weakened food security; and (iv) rising rural poverty.
However, the CCP report does not simulate cost scenarios under an LNG-dependent model, weakening the credibility and usefulness of its policy recommendations.
The industry has further criticized the report for a normative bias toward liberalized market structures, emphasizing “super-normal profits” and citing HHI (Herfindahl-Hirschman Index) metrics to suggest potential cartelization.
However, the report fails to account for real-world entry barriers, such as: (i) over $1 billion in capital investment required for new plants; (ii) long project gestation periods; and (iii) limited access to indigenous gas.
This, the industry argues, creates a false narrative of monopolistic distortion and ignores the actual economic and material constraints shaping the market structure.
Despite recognizing the fertilizer industry as “strategic for national food security,” the CCP report paradoxically raises suspicions of collusion and recommends intrusive regulatory oversight—without offering incentives or credible pathways to attract new investment, particularly in value-added fertilizers like micronutrients and liquid fertilizers.
This contradictory approach, the industry warns, may disincentivize future private investment, hindering efforts to modernize the sector and expand its value chain.
Wrapping up the comments, industry stated that the fertilizer sector contends that while the CCP report may be technically competent, it is strategically shallow. By applying a limited competition policy lens, the report fails to incorporate broader macroeconomic realities, energy policy constraints, national food security goals, and agricultural sustainability.
“A more nuanced policy approach is essential — one that goes beyond simplistic HHI metrics and recognizes the fertilizer industry as a keystone of Pakistan’s food security and economic stability,” the industry stressed.
Copyright Business Recorder, 2025