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Food security and fertiliser policy
 By  S M Hali


Food security and fertiliser policy:-Pakissan.comThe most recent surveys, however, indicate that Pakistan will face half a million metric tonnes urea fertiliser shortfall during kharif (monsoon cultivation ) season 2014 due to the curtailment of natural gas supplies to fertiliser plants.

Food security is a condition related to the ongoing availability of food. History is replete with examples of various nations being concerned regarding food security.

There is evidence of granaries being established to store grains nearly 10,000 years ago by the monarchies or central governments in the ancient civilisations of China and Egypt to control and release food from storage in times of famine.

Despite this serious concern over the availability of food, the term ‘food security’ was established as a formal concept as late as 1974 at the World Food Conference.

According to the UN’s Food and Agriculture Organisation (FAO), “Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.”

Pakistan is an agrarian society but, according to the recent National Nutrition Survey, around 60 percent of Pakistan’s total population is facing food insecurity, and in these households, almost 50 percent of women and children are malnourished, facing stunting (short height for age), wasting (low weight for height) and micronutrient deficiencies.

The poor performance of the agro sector, despite emphasis on food security, results because of a lopsided national fertiliser policy. The government had announced its first fertilizer policy in 1989 where the discount to new plants on feedstock was in justified quantum. The same was also adopted in the 2001 policy.

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 The most recent surveys, however, indicate that Pakistan will face half a million metric tonnes urea fertiliser shortfall during kharif (monsoon cultivation) season 2014 due to the curtailment of natural gas supplies to fertiliser plants.

The predicament has arisen because of mismanagement and the absence of level playing fields for old and new fertiliser plants as promised in the fertilizer policy of 2001.

The organisation that can remedy the situation is the Competition Commission of Pakistan (CCP), which should take immediate notice of the discriminatory treatment to certain old fertiliser companies regarding the supply of gas, putting certain units at a disadvantageous position as compared to new units.

Even a cursory glance at the Competition Act, 2010 depicts that the government’s handling of the fertiliser policy contradicts its provisions. Discrimination is established if any competitive edge has been given by the government to certain plants under the policy.

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Under section 29 of the said Act, the CCP is legally empowered to issue competition advice in view of competition concerns and to prevent or eliminate anti-competitive behaviour.

The same section under reference also authorises the CCP to advise the government to withdraw its discriminatory policy.

Any discriminatory policy that results in putting a segment of business into a disadvantageous position is deemed anti-competitive and the CCP has the power to intervene in favour of fair competition.

In case of a government ministry or department introducing such a discriminatory policy, the CCP has the legal authority and powers to issue a policy note.

The Competition Act 2010 also empowers the CCP to issue the policy note to relevant government departments in case discriminatory treatment to some old fertiliser companies is proved.

Since legal powers are involved, the intervention of the CCP entails thorough investigation based on industry records by seeking the input of all relevant government departments and ministries by the CCP.

With the advent of 2014, acting upon the dictates of the IMF, the government of Pakistan has raised the Gas Infrastructure Development Cess (GIDC) on gas consumers (excluding domestic and commercial) by 52 percent to 100 percent.

Its direct fallout has caused the difference of cost between urea bag prices between old and new plants to rise to approximately Rs 410 per bag or 8.2 million/MT of urea, approximately 14.8 billion considering new plants’ production capacity in the country.

When the feasibility of any project is appraised, future cash flow is calculated on account of government policies and any benefit they can provide.

At the time of policy formulation (2001) the discount between old and new plants feed gas prices was about Rs 50 per bag, which was within reasonable limits but the government has disregarded this basis resulting in heavy impairment of approximately Rs 13.0 billion per year to GOP and denial of a level playing field for some urea manufacturers.

Ironically, the ministry of industries and production has proposed the import of 0.7 million metric tons of fertiliser urea for kharif season in order to avoid a shortage.

This will burden the national exchequer by around $ 280 million, which will cause a sudden surge in its prices in the local market, further aggravating the crisis.

The need of the hour is that, in order to ensure food security, the government ensure the provision of fertilisers to the agriculture sector by removing the huge difference in production cost between old and new plants where the latter have the unfair advantage of gas subsidy.

March, 2014

Source:  Daily Times

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