The government has set aside a record 15 billion rupees for its fertilizer subsidy program this year over fears that sharp price increases in the world market could lead to shortages that have been a familiar suffering for Nepalese farmers. .
But government agencies responsible for supplying plant nutrients say the record budget is still under 5 billion rupees, and that they may not be able to import sufficient amounts if they do not start. not to prepare well in advance for this 2021-2022 fiscal year, which ends in mid-July.
Due to soaring world prices which have almost doubled in a year, nearly two dozen suppliers have terminated their contracts, meaning there could be a shortage of chemical fertilizers during the crucial paddy transplant season. in June and other cultures next year, insiders say.
The outgoing administration of Sher Bahadur Deuba has allocated an additional budget of 3 billion rupees to finance imports of chemical fertilizers in addition to the 12 billion rupees set aside by the former administration KP Sharma Oli.
“We have been informed that an additional budget of Rs3 billion has been allocated for imports of chemical fertilizers,” said Prakash Kumar Sanjel, spokesperson for the Ministry of Agriculture and Livestock Development.
The ministry estimated that the annual demand for fertilizer is around 600,000 tonnes.
This additional money could finance the import of an additional 50,000 tonnes of chemical fertilizer based on Monday’s prices.
The entire budget allocation could be enough to purchase 350,000 tonnes of fertilizer for this fiscal year, another 50,000 tonnes less than the desired 400,000 tonnes, or nearly half of effective demand, officials said.
According to Sanjel, the government targeted the import of 400,000 tonnes of fertilizer during the fiscal year, but the plan fell apart after soaring world prices.
“We have therefore lowered the import target to 300,000 tonnes based on the budget allocation,” he said.
In the last fiscal year, Nepal imported the largest ever shipment of 395,959 tonnes of fertilizer, helped by additional imports from Bangladesh under a government-to-government deal. Despite record imports, the country still suffered from a shortage.
The House of Representatives approved the budget appropriation bill on Monday amid obstructions from the main opposition CPN-UML.
Finance Minister Janardan Sharma presented on September 10 the replacement budget ordinance bill which was introduced by the former government KP Sharma Oli on May 29.
According to officials from the Agriculture Inputs Company and the Salt Trading Corporation, plant nutrients have become very expensive around the world. The two state-owned companies are the sole suppliers of chemical fertilizers to Nepalese farmers.
According to reports, urea prices recorded a sharp rise of 55% year-on-year in the first week of September.
The report showed that the cost of urea was $ 360 per tonne last year, which has now increased by almost $ 200 to $ 558 per tonne. The price of urea hit a record high of $ 815 per tonne in August 2008.
In Nepal, the purchase price of urea is Rs 60 per kg, which is sold to farmers at the subsidized rate of Rs 15 per kg.
The average price of diammonium phosphate (DAP), the world’s most widely used fertilizer, was $ 334 per tonne in September of last year, and has now more than doubled to $ 699 per tonne. The highest price of DAP recorded to date is $ 1,218 per tonne in April 2008.
The purchase price of DAP in Nepal is around Rs 90 per kg and it is sold at the subsidized rate of Rs 44 per kg to farmers.
“Since chemical fertilizers are a political product, the government of the day is worried about reducing the subsidy or increasing the price,” a ministry official said. âProposals to increase the price of urea have been made repeatedly, but no government wants to risk becoming unpopular.
The value of total imports hovers around Rs19 billion per year.
According to reports, the increase in the prices of chemical fertilizers on the world market partly reflects the rising costs of inputs, especially energy, with the prices of several energy benchmarks having doubled since May of last year.
The persistent shortages of chemical fertilizers in Nepal are due to multiple factors – from thin stocks to poor supply mechanisms and flawed policies to international price factors.
This causes chronic distress to tens of thousands of farmers every year, who also have to worry about other threats such as droughts, floods and crop failures.
A comprehensive audit report by the Office of the Auditor General highlighted significant policy gaps in the mechanism for the supply and distribution of chemical fertilizers, the absence of which creates problems for farmers every year, saying the government he himself does not know the real fertilizers of the country. requirement.
Agriculture is the mainstay of the Nepalese economy, employing around 60 percent of the total workforce and contributing 25.83 percent of the national economy.
The audit report indicates that over the past three years, the government has only been able to supply 63 percent of the chemical fertilizer requirement. But this too is based on the estimated demand of 600,000 tonnes.
A separate report from USAID, an international development agency, showed that Nepal is heavily dependent on contraband fertilizers, and estimates that nearly 70 percent of the 600,000 to 800,000 tonnes of fertilizer consumed in Nepal are imported. inappropriately.
The audit report indicates that it takes almost a year to procure chemical fertilizers in Nepal.
According to the audit report, in 2018-2019, the average time to import and supply fertilizer was 338 days, or more than 11 months. The country imported 366,794 tonnes of chemical fertilizers that year.
In 2019-2020, out of nine contractors who received fertilizer supply contracts, only two were able to deliver the product on time. The other seven contractors delayed the shipment by 203 days, according to the report. This year, 359,086 tonnes of fertilizer were imported and the average lead time was 253 days.
In the last fiscal year 2020-21, out of 10 contractors, only three supplied fertilizers on time. The rest delayed delivery by 17 to 57 days. The average supply period over the past fiscal year was 224 days.