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Dhaka Tribune

Bangladesh paying heavily for inefficiency, poor maintenance of local fertilizer units

Fertilizer subsidy increased four times in a year

Update : 13 Apr 2022, 12:04 AM

Thanks to skyrocketing prices of chemical fertilizers in the post-pandemic international market that has further been propelled by the Ukraine war, Bangladesh is now required to bear a record high import bill to keep its farm sector productivity intact.

Against a budgetary subsidy provision of Tk9,500 crore earmarked for current fiscal (2021-22), Bangladesh government has already spent way above the threshold in the first nine months and will be required to spend more in the last quarter of the financial year.

Agriculture Minister Dr Muhammad Abdur Razzaque shared his thoughts on this fiscal's projected high fertilizer subsidy amount at Tk30,000 crore. This amount is over four times higher than what Bangladesh had spent in the last fiscal (2020-21).

The Ukraine war and a prolonged period of the Covid-19 pandemic caused a serious disruption in global fertilizer trade, jacking up the prices of key farm nutrients three times higher over the one year. And unlike the recent Indian budget cut on farm subsidy, the Bangladesh government decided to keep providing the subsidy to fertilizer so that farmers' cost of production is not increased, which would otherwise have a negative impact on already high commodity prices in the domestic market.

Why does Bangladesh require to pay high import cost, bear subsidies?

Industry sources and market analysis suggest that inefficiency, ageing machines and poor maintenance of state-run fertilizer factories is a key reason why Bangladesh's import dependency on chemical fertilizer keeps increasing, costing the national coffer dearly.

The public sector Bangladesh Chemical Industries Corporation (BCIC) operates six urea factories, one triple super phosphate (TSP) complex and two other factories for the production of diammonium phosphate (DAP) - all key ingredients of modern chemical fertilizer-dependent agriculture.

But against an installed capacity of producing around three million tons of fertilizers, the BCIC factories are limping with an aggregate yearly production, which is not even half of their capacity threshold

Officials speaking on condition of anonymity, attributed such low domestic production of chemical fertilizers to lack of farsighted vision on Bangladesh's vibrant farm sector's increasing nutritional demands, inefficiency and graft practices in BCIC units, poor maintenance of factories, lack of timely overhauling and crisis in proper gas supplies to the BCIC factories.

BCIC sources said many of their units cannot run all year round and have to sit idle some days for want of gas from the national grid, and some of the units are ageing and have lost production efficiency owing to not being overhauled in time.

As a result, the BCIC-run fertilizer factories require much more gas than ideally required to produce each unit of urea fertilizer.

Fertilizer demand and production scenario

At a media briefing in Dhaka yesterday, ministers and officials said in the coming financial year (2022-23) Bangladesh will require 6.7 million tons of fertilizers, including 2.6 million tons of urea, 1.5 million tons of DAP, 0.7 million tons of TSP and 0.75 million tons of muriate of potash (MoP). More than 70% of these fertilizer needs will have to be met by costly imports.

According to statistics provided by Bangladesh Fertilizer Association (BFA), BCIC could provide hardly a million tons of urea against a demand of 2.6 million tons in the current fiscal while BCIC units were able to meet only one-fifteenth of DAP needs and a seventh of total TSP needs in the country.

Bangladesh's farm sector growth over the past five decades heavily banked on use of fertilizers along with irrigation and adoption of modern high yielding crop varieties. For instance, Bangladeshi farmers succeeded in having the country's rice production more than treble  from just 10 million tons in 1971 to over 35 million tons now. During this same time duration Bangladesh also witnessed the application of chemical fertilizer increasing phenomenally from just 20 kilograms a hectare to upto 300 kilograms a hectare.

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