Nepal is expected to receive above normal monsoon rains this year, according to meteorologists in South Asia. Ideally, this increases the growth prospects of the economy battered by the Covid pandemic.
Abundant rainfall will not only increase agricultural production, but will also help replenish groundwater and reservoirs essential for electricity consumption and generation.
But there are concerns.
Officials say Nepal may not be able to reap the gains this year. The crisis of a crucial element – chemical fertilizers – is expected to hurt the economy and could even lead to a large-scale food crisis.
Time is running out and it seems that the government is unable to import enough chemical fertilizers for the main monsoon crop, mainly paddy.
The paddy crop is a major contributor to the economy and the planting season is expected to start next month.
As of May 1, fertilizer stocks at two state suppliers—Salt Trading Corporation and Agriculture Inputs Company—were nearly depleted. And import prospects are also diminishing, according to multiple sources familiar with the matter.
At least three government fertilizer supplier officials the Post spoke to said the shortage in Nepal during the key paddy transplanting period was an ongoing problem and that this year the crisis may worsen further. .
If the monsoon is above normal and the fertilizer supply is below normal, there is no gain, they said, adding that the agricultural sector would suffer and farmers would lose income.
Although there is immediate concern about the impact of high food prices on food securityparticularly in low- and middle-income countries, soaring fertilizer prices and concerns about availability are clouding future harvests and therefore risk continued high food prices for a longer period, according to Washington International Food Policy Research Institute.
The price increase of coal in China, the main feedstock for the production of ammonia there, as well as the phasing out of inefficient production capacities, have also led to a reduction in production, also contributing to the rise in global fertilizer prices.
High energy prices, strong demand and limited supply have also pushed potash spot prices higher in 2021 and 2022. China has restricted urea imports since October 2021.
According to a consensus statement released by the 22nd session of the South Asia Climate Outlook Forum last week normal to above normal rainfall is very likely during the 2022 southwest monsoon season [June–September] over most parts of South Asia.
Geographically, above normal rainfall is very likely along the foothills of the Himalayas, in many areas of the northwestern and central parts of the region, and in parts of the eastern and southern parts of the region, according to the press release.
Nepal plans to unveil the country’s outlook on Friday.
“The encouraging forecast of an above normal monsoon augurs well for a timely start of planting of summer crops, especially paddy,” said Indira Kandel, Senior Divisional Meteorologist and head of the climate analysis section in the Department of Hydrology and Meteorology. “The monsoon obviously benefits the country’s economy, mainly crop production. But there should be good preparations to reap the benefits.
The climatic outlook invites the region to be well prepared.
“There are good rain forecasts and along with that, farmers should get enough fertilizer and seeds in time for the country to benefit from the above normal monsoon,” Kandel said.
Apart from the agricultural perspective, an above normal monsoon could prove catastrophic if the response is not timely, Kandel pointed out.
“It’s a sensitive issue. You need good planning to minimize risk,” Kandel said.
The monsoon is crucial for the economy of 4.85 trillion rupees, as it brings almost 80% of the rains needed by farms, in addition to replenishing reservoirs and aquifers.
Almost two-thirds of Nepal’s agricultural land is rainfed and depends on the annual rains from June to September. Agriculture represents 23.95% of the economy but supports more than 60% of the population.
Summer crops, mainly paddy, alone contribute more than 11 percent to the national gross domestic product and are the main sources of income for more than half of the population.
Paddy, which is transplanted in June and harvested in October, contributes about 7% to gross domestic product.
But the paddy needs fertilizer.
Chemical fertilizers in Nepal are a political commodity. Experts say it could stoke unrest among the country’s politically important farmers ahead of the general election.
The government played.
“We’re in a tough spot,” said Pankaj Joshi, deputy chief executive of the Salt Trading Corporation, a public-private supply company that sells subsidized chemical fertilizers. “The problem started when China restricted exports. Then the Russian-Ukrainian war aggravated the situation.
Moscow invaded Ukraine on February 24 and the war continued, affecting shipping and impacting the global economy.
“Russia offers a 30% discount on fertilizer prices, but no one is willing to risk importing from the war zone,” Joshi said.
During the paddy planting season, Nepal will need 210,000 tons of chemical fertilizers. And the country must secure between 150,000 and 170,000 tons to avoid devastation.
“So far, Salt Trading Corporation has been able to secure 42,000 tons over the next four months,” Joshi said. “This shipment will start entering the country after 20 days…if things go as planned.
In recent months, according to state-owned fertilizer suppliers, many tenders have been canceled by global suppliers [who supply to the two state-owned companies] due to rising international prices.
Agriculture Inputs Company, the state-owned fertilizer supplier, had planned to import 50,000 tons of chemical fertilizers but “a technical error” occurred in the documentation process and it was cancelled, according to a development official.
“He has handed out a tender and it will take at least 30 days to open the letter of credit and another 90 days to bring the consignment, if things go as planned,” the official said. “That means it will take at least four months to import fertilizer for June.”
World food and fertilizer market prices have risen dramatically over the past year and a half and reached even higher levels after Russia’s invasion of Ukraine in February, reaching their all time highs ever recorded in March, according to the International Food Policy Research Institute.
According to Joshi, urea cost $390 per ton in November 2020, but it now costs $1,100 per ton. In Nepal, urea currently costs 134 rupees per kg, while public suppliers sell it at 15 rupees per kg.
The price of di-ammonium phosphate (DAP) was $375 per tonne two years ago, and it now costs $1,307 per tonne. The price of DAP has increased to 160 rupees per kg, but is priced at 43 rupees per kg at a subsidized rate.
“The price is extraordinarily high,” Joshi said.
For example, the purchase of 100,000 tons of chemical fertilizers, which cost 3 billion rupees two years ago, now costs 12 billion rupees.
Normally, the country plans to provide 500,000 tons of chemical fertilizers per year by spending about Rs 15 billion. “Importing the same amount of fertilizer will now cost Rs 75 billion,” Joshi said.
Officials say that during election time, the government cannot make an unpopular decision to raise prices. On the other hand, it cannot finance the purchases of fertilizer either, given the high prices.
This puts Nepal’s economy in a dilemma.
Even neighboring India, with whom Nepal recently signed a government-to-government agreement to import fertilizers, is one of the most affected by the global fertilizer crisis. India imports up to a third of its fertilizers and is the world’s largest buyer of urea and diammonium phosphate.
Persistent shortages of chemical fertilizers in Nepal are due to multiple factors, from low stocks to poor supply mechanisms and faulty policies to international price factors.
This causes chronic distress for tens of thousands of farmers each year who must also worry about other threats such as droughts, floods and crop failures.
A comprehensive audit report by the Office of the Auditor General pointed to significant policy gaps in the chemical fertilizer supply and distribution mechanism and stated that the government itself does not know the real fertilizer needs of the country.
“Farmers are forced to stand in long queues at the depots where fertilizer is distributed each year. This year the queues will be much longer but only a few will get vital agricultural inputs,” according to a government official who wished to remain anonymous. “The situation escapes us. The only glimmer of hope is India if it sends fertilizer.
Prakash Kumar Sanjel, spokesman for the Ministry of Agriculture and Livestock Development, said the government-to-government agreement to import 150,000 tons of chemical fertilizers from India is a work in progress.
India has named its Rashtriya Chemicals and Fertilizers and on the Nepali side, the government has appointed Agriculture Inputs Company to sign a fertilizer import business deal following the initial deal that was struck on Feb. 28 between the two neighbors, he said.
The Agriculture Inputs Company chief left for Delhi last Friday to discuss a trade deal with Rashtriya Chemicals and Fertilizers Ltd.
“The joint steering committee of Nepal and India is about to finalize the rates according to the import parity price,” Sanjel said. The import parity price is the border price of an imported good, which includes transport costs and international tariffs.
But, if this does not happen, the country’s economy as well as the food supply situation could play out differently in the next fiscal year, according to an official from one of the state-owned fertilizer suppliers.
“We are hopeful and expect the negotiations to be completed soon and the fertilizer to arrive by the end of May,” Sanjel said.