Finance Ministry has refused to increase subsidy on phosphatic and potash fertilizers due to serious financial constraints and being under an IMF program and urged provinces to enhance their shares, well informed sources told Business Recorder.

At a recent meeting of the ECC, the Ministry of National Food Security and Research stated that Pakistan meets around 84 percent of its fertilizer requirement through local production while the remaining is met through imports. According to preliminary first estimates of Wheat Crop 2021-22, released by the Punjab and Balochistan Crop Reporting Services Centres (CRS) area of wheat crop has shown a decreasing trend.

According to Ministry of National Food Security and Research, production of other Rabi crops my also decline by 7-10 percent due to low off-take of fertilizers and high cost of production.

It was stated that provision of subsidy on phosphate fertilizer would help to promote balanced use of fertilizer by narrowing down the price gap. Thus the balanced and recommended use of fertilizer could increase productivity and resultantly enhance the income of farming community.

Keeping in view facts, Ministry of National Food Security and Research proposed subsidy disbursement in Kharif 2022 season through provinces using their existing mechanism on sharing basis (50:50) for phosphate and potash fertilizer. Ministry of National Food Security & Research calculated subsidy on Kharif Crop-2022 on the basis of estimated fertilizer (Phosphate) off take during Kharif 2021. Subsidy on Phosphate Fertilizer during Kharif 2022 (April to September) was estimated at the rate of Rs.43.48 per kg of Phosphate or Rs. 1000 per bag of DAP.

The estimated amount of subsidy will be Rs 24.26 billion of which required subsidy on DAP will be Rs 20.16 billion.

The Ministry of National Food Security and Research further noted that in view of current scenario, subsidy disbursement in Kharif season 2022 through provinces using their existing mechanisms was proposed on equal sharing basis (50:50) for phosphatic fertilizers. Federal Government’s share would be Rs.12.13 billion. The share of subsidy calculated on the basis of provincial fertilizer off-take was highlighted as under: (i) Punjab off-take 71.4 per cent; (ii) Sindh 21.6 per cent; (iii) KP 3.8 per cent; and (iv) Balochistan 3.2 per cent. The share of Punjab was Rs 17.32 billion, Sindh, 5.24 billion, KP Rs 0.92 billion and Balochistan 0.72 billion.

During the ensuing discussion, Secretary, Finance Division, stated that agriculture is a provincial subject and therefore, it is the responsibility of the Provincial Government to provide subsidy to farmers. He added that there is a serious financial constraint and the country is under the IMF program; therefore, any additional financial commitment is not supported. He further observed that there is neither any information on the use of counterpart funding by the Provincial Governments nor any tracking system to gauge judicious utilization of subsidy amount by the provinces. The ECC recommended that tracking system should be strengthened across the country. After detailed discussion, the ECC approved the proposal with the proviso that the Ministry of National Food Security and Research will take up the issue with the Provincial Governments to increase their share in the subsidy due to the fact that the subject falls within the domain of the Provinces.

The story was originally published in Business Recorder on March 28, 2022.