As a result of sharp price increases on the world market, the government has set aside a record Rs15 billion for its fertiliser subsidy programme this year, worrying that shortages, which have been a familiar source of pain for Nepali farmers in the past, could occur.
Officials from government agencies in charge of plant nutrient procurement have stated that despite the record-high budget, they are still Rs5 billion short, and that they may not be able to import sufficient quantities if they do not begin making preparations well in advance of the fiscal year 2021-22, which ends in mid-July.
Nearly two dozen suppliers have pulled out of their contracts as a result of rising world prices, which have nearly doubled in a year. As a result, there could be a shortage of chemical fertiliser during the critical transplantation season of paddy in June and other crops the following year, according to industry insiders.
The existing Sher Bahadur Deuba administration has allocated an additional budget of Rs3 billion to finance chemical fertiliser imports, on top of the Rs12 billion already put aside by the previous KP Sharma Oli administration to cover the costs of such imports.
Prakash Kumar Sanjel, a spokesperson for the Ministry of Agriculture and Livestock Development, said, R20;We have been informed that an additional budget of Rs3 billion has been allotted for chemical fertiliser imports.”
According to the Ministry of Agriculture, the annual requirement for fertiliser is approximately 600,000 tonnes.
On the basis of Monday’s prices, this additional money might be used to fund the import of an additional 50,000 tonnes of chemical fertiliser into the country.
Officials estimate that the whole budget allocation will be sufficient to acquire 350,000 tonnes of fertiliser for the current fiscal year, which is still 50,000 tonnes short of the desired 400,000 tonnes, which is roughly half of the effective need, they said.
According to Sanjel, the government had planned to purchase 400,000 tonnes of fertiliser during the current fiscal year, but the plan went awry when global fertiliser costs skyrocketed following the global financial crisis.
Because of this, he explained, R20;we have lowered the import objective downward to 300,000 tonnes based on the budget allotment.”
Nepal imported 395,959 tonnes of fertiliser in the past fiscal year, the greatest shipment in the country’s history. This was made possible by additional imports from Bangladesh, which were made possible through a government-to-government agreement. Despite record imports, the country was nevertheless plagued by a lack of goods.
The budget appropriation measure was approved by the House of Representatives on Monday, despite resistance from the CPN-UML, which is the largest opposition party.
On September 10, Finance Minister Janardan Sharma presented the replacement bill for the budget ordinance, which had been introduced by the former KP Sharma Oli government on May 29 and was vetoed by the Supreme Court.
According to representatives from the Agriculture Inputs Company and the Salt Trading Corporation, plant nutrients have grown prohibitively expensive throughout the world. The two state-owned enterprises are the exclusive suppliers of chemical fertilisers to Nepalese farmers, according to the government.
The price of urea increased by an astounding 55 percent year on year in the first week of September, according to news reports at the time of publication.
urea was $360 a tonne last year, according to the report, but the price has since jumped by nearly $200 to $558 per tonne, according to the report. In August 2008, the price of urea reached an all-time high of $815 per tonne, setting a new record.
Urea is purchased at a cost of Rs60 per kg in Nepal, and it is supplied to farmers for a cost of Rs15 per kg, which is a significant subsidy.
DAP, the world’s most frequently used fertiliser, had an average price of $334 per tonne in September of last year. That price has now more than doubled to $699 a tonne, according to the World Agronomy Organization. The highest price of DAP ever recorded is $1,218 per tonne in April 2008, which was the highest price ever recorded.
When DAP is purchased in Nepal, the price per kilogramme is approximately Rs90 per kilogramme, and it is sold to farmers at a subsidised rate of Rs44 per kilogramme.
R20;Because chemical fertiliser is a political commodity, the incumbent administration is concerned about cutting the subsidy or raising the price,” according to a ministry official. A proposal to raise the price of urea has been floated on multiple occasions, but no administration wants to face the chance of becoming unpopular by doing so. ”
Approximately Rs19 billion worth of total imports are brought in each year.
Since reported by several sources, the increase in the price of chemical fertiliser on the global market is partly due to rising input costs, particularly energy, as the prices of certain energy benchmarks have more than quadrupled since May of the previous year.
The persistent shortages of chemical fertilisers in Nepal are the result of a variety of problems, ranging from low stockpiles to inefficient supply methods, as well as inadequate regulations and worldwide pricing considerations.
Difficulties like these bring chronic distress to tens of thousands of farmers every year, who are also concerned about other hazards such as drought, flood, and crop failure.
In a comprehensive audit report, the Office of the Auditor General identified major policy lapses in the supply and distribution mechanism of chemical fertilisers, a lack of which causes problems for farmers every year. The report also stated that the government itself does not know what the country’s actual fertiliser requirement is, despite the fact that the country has a fertiliser shortage.
Farming is the economic backbone of Nepal, employing over 60% of the country’s total workforce and contributing 25.83 percent to the national economy.
According to the audit study, the government has only been able to meet 63 percent of the demand for chemical fertilisers during the last three years. However, that projection is predicated on a demand of 600,000 tonnes, which is conservative.
Another assessment by the United States Agency for International Development (USAID) found that Nepal is heavily reliant on illegal fertilisers, with an estimate that almost 70% of the 600,000 to 800,000 tonnes of fertilisers consumed in the country are improperly imported.
According to the audit study, it takes approximately a year for chemical fertilisers to be procured and delivered in Nepal.
Following the audit report, it was found that the average time it took to import and provide fertiliser in 2018-19 was 338 days, which is more than 11 months. In that same year, the country imported 366,794 tonnes of chemical fertiliser.
Only two contractors were able to deliver fertilisers on schedule in 2019-20, out of nine who were awarded contracts to supply the commodity in the previous year. According to the report, the remaining seven contractors caused a 203-day delay in supply. An estimated 359,086 tonnes of fertiliser were imported this year, with an average delivery time of 253 days.
Only three contractors delivered fertilisers on time during the most recent fiscal year 2020-21, out of a total of ten. The remaining items caused delivery to be delayed by 17 to 57 days. During the most recent fiscal year, the average supply period was 224 days.