Severe fertiliser crisis looms as government continues to fumble

February 22, 2022

Sangam Prasain, The Kathmandu Post, February 22, 2022

As the government fumbles in signing a deal with India for the supply of fertiliser amid Nepal's political chaos, farmers are dreading a repeat of the customary shortage during crop season.

The agriculture sector has not been performing well this year due to various reasons, and a possible fertiliser fiasco could precipitate a disaster. Officials have hinted that the scarcity this year could be more severe than anytime before.

Chemical fertiliser has become a political commodity, and Nepali farmers have been plagued by repeated shortages when they need it the most, severely slashing their income and hitting the country’s economic growth which largely depends on farming.

Scarcities have been appearing annually during the peak crop planting period, especially in recent years with more Nepali farmers going into commercial farming which has pushed up demand.

A shortage is imminent this year too, insiders say.

Govinda Prasad Sharma, secretary at the Ministry of Agriculture and Livestock Development, told a media briefing on Monday that they were in constant touch with Delhi to sign a long-term or five-year fertiliser deal after the cabinets of both countries give the go-ahead.

“But it looks like the two countries are waiting for some political meetings to happen before the deal.” The ministry indicated that it would not be able to fulfil the needs of farmers this year.

Multiple sources say that the government will not be able to meet even half of the chemical fertiliser requirement this year which may trigger farmer protests during the proposed local elections in May with prices soaring to historic highs.

“If the deal with India materialises, we can import at least 150,000 tonnes of farm nutrients within a month,” said Sharma. "Chemical fertiliser prices have been increasing for the last 17 months as manufacturers have cut production."

According to reports, retail fertiliser prices cooled off a bit during the first week of February.

Coming off an all-time record-high price, the retail urea price dropped to $905 per tonne in early February from $913 per tonne in January. In August 2020, the price of urea was $350 per tonne.

But the price of DAP rose to $877 per tonne in early February from $863 per tonne in January. In 2020, DAP cost just over $400 per tonne.

Based on global prices, urea now costs Rs130 per kg in Nepal while state-owned suppliers are selling it at the subsidised price of Rs14 per kg. The price of DAP has gone up to Rs145 per kg and it is being distributed at the subsidised rate of Rs43 per kg.

Agriculture Minister Mahindra Ray Yadav, who invited the press for a briefing on the achievements of his first 100 days in office, said that fertiliser scarcity was a perennial problem and it would remain until some drastic measures were taken.

“Prices have increased steeply globally this year,” he said.

The Nepal government used to allocate Rs12 billion annually to cover the cost of the subsidy. “Now it costs more than Rs45 billion,” said Yadav.

The existing public procurement process is so lengthy that it has been causing shortages during the peak season for the past several years, he added. “I believe the existing procurement law is faulty. It has failed.”

Minister Yadav too is totally clueless about ensuring regular supply of fertiliser. "But after Nepal gets a chemical fertiliser plant, everything will become all right."

Several former agriculture secretaries have said that Nepal has not been able to import even 500,000 tonnes of chemical fertiliser annually, and asked how the country can import raw materials to produce the farm input at home under the same procurement law.

“Nepal plans to build a multi-billion-rupee chemical fertiliser plant when it cannot even import half a million tonnes of fertiliser per year,” said a former secretary, who wished to remain anonymous. “It’s a bullshit idea to spend taxpayer money.”

“We have seen many public enterprises turning into a white elephant. This too will be no exception,” said the former secretary. “The only solution is to build a warehouse and create a buffer stock so that shortages will not recur.”

Nepal is perpetually short of chemical fertilisers due to multiple factors—from lean inventories to poor supply mechanisms and from faulty policies to fluctuating international prices. This causes chronic distress to tens of thousands of farmers annually on top of other risks like droughts, floods and crop failure.

Agriculture is the mainstay of Nepal's economy, employing around 60 percent of the total workforce and contributing 25.83 percent to the national economy.

The Ministry of Agriculture and Livestock Development has estimated that the annual demand for fertilisers stands at around 600,000 tonnes.

But reports say the estimate is years old and no study has been done to calculate the actual demand for fertilisers and make forecasts.

The incumbent Sher Bahadur Deuba administration has allocated an additional budget of Rs3 billion to finance chemical fertiliser imports on top of the Rs12 billion set aside by the erstwhile KP Sharma Oli administration.

The sum was thought to be enough to finance the purchase of at least 500,000 tonnes of fertiliser. But after the global price rise, all estimates have gone haywire.

A separate report by USAID, an international development agency, has shown that Nepal is highly dependent on smuggled fertilisers, and estimates that nearly 70 percent of the 600,000 to 800,000 tonnes of fertilisers consumed in Nepal is improperly imported.

But since India is one of the worst affected by the worldwide fertiliser crisis, Nepali officials say the suffering will be greater this year as Nepali farmers dependent on smuggled fertiliser will lose their unofficial supply.

It normally takes six months to procure chemical fertiliser following a global tender call under the Public Procurement Act. And in case the procurement is cancelled due to price volatility or other factors, it leads to havoc in the farm sector.

The new arrangement made through a government-to-government deal need not go through a lengthy procurement process, and it will ensure that farmers have adequate supply during times of shortages, according to ministry officials.

As per the draft accord, Nepal can buy up to 200,000 tonnes of chemical fertiliser, most of it urea, from the southern neighbour annually without following a global tendering process.

Nepal had revived long-stalled talks for a chemical fertiliser agreement with India in December last year under which it would buy a fixed amount over a long-term period to avoid frequent shortages during the main growing season.

“We have completed everything from outside for the fertiliser deal with India,” said Sharma, the agriculture ministry secretary. “We hope the fertiliser issue will get priority through a political setting.”

But some officials, including former secretaries, say that may not happen, at least before the paddy planting season in early June. 



Submit your details below to receive Newsletters