Pakistan has a large fertilizer industry that is critical to its agriculture-based economy. The industry produces urea, DAP, and other fertilizers using natural gas and phosphate rocks as key raw materials. Urea is the most widely used nitrogen fertilizer and accounts for the majority of fertilizer consumption. The fertilizer industry faces challenges related to availability and pricing of natural gas, international fertilizer prices, and ensuring adequate domestic supply. Fertilizer use helps increase yields for major crops like wheat, cotton, rice, and sugarcane but application rates remain below potential.

1. INDUSTRIALANALYSIS OF FERTILIZERINDUSTRY
Pakistan is an agro-based country and there are well renowned manufacturers and suppliers of fertilizers in
Pakistan. Pakistan is one of the ten major producers of wheat in the world with an average 24 million tons
output per season. Major Fertilizers industries of Pakistan produceddifferent kind of fertilizers with
ranking of Engro Pakistan 33% Urea Production share Fauji Fertilizers (Goth Machi) 38%Fauji Fertilizers (Bin
Qasim) 7%Engro Fatima Pak 6% Arab (Multan) 8%Agri Tech(Mianwali) 7% Dawood Hercules (Skp) 6% Only FF
produces DAP.Urea and Phosphate Market Share by Firm 44% 9% 27% 6% 9% 5% Urea Market share Fauji
Fertilizers National Fertilizer Marketing Ltd. Engro Fertilizers Dawood HerculesReliance Group.
BriefHistory of FertilizerIndustry
The fertilizer industry is an integral part of Pakistan’s economy. The Pakistani fertilizer industry produces,
imports and distributes various types of fertilizers. The National Fertilizer Corporation (NFC), a government
corporation remainedfor most of Pakistan’s history as the largest manufacturer of fertilizers.
After the partition of the sub-continent, the Food and Agricultural organization (FAO) entered the scene
forming an agreement with the Government of Pakistan. This resulted in the initiation of Rapid Soil Fertility
Survey and Population of Fertilizers project in 1958. The conclusion from these studies was that the
Pakistani soil is highly deficient in Nitrogen content and thus more emphasis should be placed on Urea
consumption. Secondly theyalso concludedthat our agriculture output is 1/3 rd of our potential.
Ayub Khan’s green revolution emphasized on the fertilizer sector in the Public Sector. The NFC set up
Pakistan’s first fertilizer plant in 1958. The first private sector plant was set up by Exxon at Dharki in 1965 at
a cost of $43 million. This was followed by Fauji Fertilizer in 1977 and Dawood Hercules later on. The NFC
owned and operated six manufacturing units that accountedfor the balance.
Until 1986, the fertilizer industry was highly regulated. The government fixed prices and the profitability of
the manufacturers was capped at 20% of ROE. The regulated environment stifled private sector investment
in the fertilizer industry, leading to a widening demand-supply gap that had to be bridged through
expensive imports.
Urea prices were deregulated in 1986. However, this did not help the manufacturers significantly as urea
price increases were not large enough to offset the loss incurred on selling costly imported urea at lower
prices in the local market. By 1991, urea imports had risen to 584,900 tons, approximately 27% of installed
capacity. Imports were not only causing damage to the local industry, but were also affecting the country’s
foreign exchange reserves. In 1991 the government initiated a fertilizer policy which granted special
incentives for setting up new projects and expansions.
Importance Of Agriculture In Pakistan’s Economy
The agriculture sector is important because it accounts for:
 24% of the country’s GDP
 50% of the employed labor force
 65% of the country’s total export earnings making it the largest source of FX earnings
 Forms the basis for over 50% of industrial production
 Has growth rate of 3-4% per annum

2. And that population growth is roughly gauged at 2.3% p.a. (current population: 134mn) compared to 2.2%
p.a. in India and 2.4% p.a. in Egypt. With larger population comes greater demand for food consequently
higher demand for grain.
Problems In The Agriculture Sector
Our agricultural land is facing many problems and some of the major problems are:
 The conversion of arable land into non-agricultural uses
 Water-logging and salinity
 Land erosion scenarios
The total land area of Pakistan is nearly 80 million hectares and the total arable land area is 23 million
hectares. With the population presently at 134 million and the population growth rate at 2.3% p.a., the
situation is bound to put tremendous pressure on the arable land of Pakistan in the near future. Our
current and potential agricultural land is reducing and shrinking tremendously. It has been estimated that
throughout the country, everyday approximately 500 acres (1 acre = 4,840 square yards) of farmland is
taken out of agriculture by the expansion of settlements, roads, factories and many other non-agricultural
activities. It is predicted that if this trend continues then after every decade approximately a million acre or
more of crop land would be taken out of agriculture in our country.
Arable land is a basic and major resource for the production of human food. But it seems that the
expansion of human population and human activities are reducing the availability of land, suitable for food
production at an alarming rate. Expanding population demands more food on one side and devours
agricultural land on the other side, which is a matter of great concernfor everyone.
Importance Of Fertilizer
Food consumption is likely to rise in emerging markets where economic growth results in better income
per capital because higher income would lead to increased food consumption and hence greater grain
demand. With growth in arable land diminishing as a consequence of rapid soil erosion, fertilizer usage will
continue to play an important role in food production. Despite bouts of industry swings in the
intermediate terms, secular industry dynamics will remain robust for the industry because of the estimated
5-6% p.a. long terms growth in fertilizer demand in Pakistan and the largely inelastic food demand.
BenefitsTo The Crops
Fertilizer provides a number of benefits not only to the plants but also to the soils. The proper usage of
fertilisers ensures that the soils retains its productivity and does not lose the nutrients that the crops need
for sustained growth. Fertiliser gives the soil the nutrients which it is deficient in and also reduces top soil
erosion. Fertilizer also improves the yield of the crops – this is described in a later section of this report.
Another benefit from fertilizer usage is that it provides better resistance to plants from diseases.
The Nitrogenous Fertilisersprovide the plant with Higher Protein Content, Color and Growth.
The Phosphorous Fertilisers promote strong, healthy root development and helps plants mature more
rapidly and thus aids in blooming and seed formation. They are also critical for the synthesis of energy
regulating substances in plants

3. The Potassium Fertilizers raise the resistance of plants to diseases and promotes growth from root to
stack. They also increase the plumpness of grains and seeds, and provides winter hardiness to legumes and
other crops.
FERTILIZERPRODUCTIONMATERIALS
PHOSPHATEROCKS
This is the principal raw material used in the manufacture of DAP and accounts for almost 65% of
production costs. In comparison, anhydrous ammonia represents up to 28% of manufacturing costs. The
need to import phosphate rocks will commence with the commissioning of Fauji Jordan in 1998 (DAP
capacity: 445,000 TPA) and the Al-Noor plant in 1999 (DAP capacity: 390,000 TPA), which will pioneer the
local manufacturer of DAP.
Initially we also had production through imported phosphate rocks (Lyallpur Chemicals) but we could not
sustain the burden for too long and discontinued it. Then the set up of Pak Arab Company and Hazara
Phosphate used our own phosphate rocks. However we ran out of them and thus the need to import
expensive DAPfertiliser
NATURAL GAS
The principal raw material for the manufacture of anhydrous ammonia, and therefore, fertilizers, is natural
gas. In fact, fertilizer industry is the second largest consumer of Pakistan’s total gas availability (26% for
fertilizer consumption vs. 33% in the case of energy). Natural gas used as feedstock, which is an essential
input in the production of ammonia, average roughly over 30% of fertilizer production costs and around 75%
of total gas requirement. Used additionally for fuel purposes (fuel stock), natural gas generally accounts
for over 55% of production costs.
Two main natural gas suppliers are Sui and Mari gas fields. Sui Gas is located in Balochistan and caters to
the needs of Dawood Hercules, Pak Arab, and Pak China fertilizer plants. Mari Gas on the other hand is
located at Dharki, Sindh (site of Engro Chemical) and supplies gas to the three big urea manufacturers –
Fauji, Engro and Pak Saudi. Mari Gas users typically operate well above design capacity, whereas Sui users
have to face gas shortages.
Besides pricing, gas from Mari Gas differs from SSGC in its chemical content. Because Sui has a higher
energy content (94.4% methane by volume) as compared to Mari (74% methane by volume), a greater
quantity of Mari gas is required to manufacturer one ton of urea as compared to Sui. Sui is supplied to both
industrial and domestic users. In contrast Mari, consumption is strictly industrial. The fertilizer units
preference for non-pipeline (hence Mari gas) over pipeline gas is explained by the fact that they do not
have to share the former with domestic consumers.
CommercialClassification of Fertilizer
These are classified into three categories according to their element(nutrient) structure:
Nitrogen (N): Increases the protein content of plants, gives them color and acceleratesgrowth

4. Phosphorous (P): Promotes strong, healthy root development and helps plants mature more rapidly and
thus aids in blooming and seed formation. It is critical for the synthesis of energy regulating substances in
plants
Potassium (K): Raises the resistance of plants to diseases and promotes growth from root to stack. It
increases the plumpness of grains and seeds,and provides winter hardiness to legumesand other crops.
These fertilizer which come in a myriad of mixes and composition, are regularly applied according to soil
conditions, weather conditions, crop type and the desired productivity.
Nitrogen Fertilizers
Of the three nutrient type (NPK) nitrogen fertilizer have shown the strongest growth trend in Pakistan
primarily because of their proven ability to improve plant yield, produce green coloring and to accelerate
growth through protein injection. Since anhydrous ammonia is the raw material required for formulating
the nitrogen fertilizer, more than 80% of its application is toward fertilizer manufacture (anhydrous
ammonia is itself produced from a reaction between nitrogen and natural gas).
The leading nitrogen based fertilizer derived from ammonia is Urea (other includes sodium nitrate,
ammonium nitrate and calcium nitrate). Urea is the most concentrated form of dry nitrogen and is
synthesized by the reaction of ammonia and carbon dioxide and then solidified. Urea holds the advantage
of being easy to transport and handle, and contains around 46% nitrogen (therefore its nutrient name,
46N). Urea in its granular form, is preferred over anhydrous ammonia gas because of the ease of granular
use, transport and storage.
Phosphate Fertilizers
Generally denoted by the chemical symbol P2O5, phosphatic fertilizers help facilitate metabolic processes
such as photosynthesis. The types of Phosphatic Fertilizers are Single Super Phosphate (SSP) and Triple
Super Phosphate (TSP). These can be combined with nitrogen (in the form of ammonia) to obtain
commercial fertilizers such as Nitro Phosphate, Di-Ammonium Phosphate (DAP: 46% P2O5) and Mono–
Ammonium Phosphate (MAP: 50% P2O5). DAP and MAP have won preference over other phosphate
fertilizers in the last 10 years because of their easy shipping, handling and application.
Potash Fertilizers
The potash nutrient is essential for various activities ranging from photosynthesis to fruit formation, plant
hardiness and protein formation. Other benefits of potash fertilisers also include resistance to diseases,
growth enhancement and legume growth. Potassium Chloride (or potash) is the most common potassium
fertilizer and is referred commonly as K2O (however the proper chemical symbol is KCl). Other forms of
potassium fertiliser which are used are PotassiumSulphates.These are fully imported into the country.
FACTORS AFFECTING DOMESTICFERTILIZER
AVAILABILITY OF NATURALGAS
Currently most of the companies get uninterrupted gas for their production – except for those which are
supplied by Sui Northern which supplies gas 9 months of the year. In the future, if no new substantial gas

5. fields are discovered then there is a possibility of shortfall in gas supplied to the fertilizer manufacturing
companies. This will reduce the fertilizer supply in the market and cause higher imports.
PRICE OF NATURALGAS
If the price of the natural gas is increased the supply would be effected as none of the fertilizer
manufacturers would be willing to produce any fertilizer at such high gas prices. The better option for the
manufacturers, in terms of feasibility, would be to move to the Gulf countries where the price of natural
gas is much lower as compared to Pakistan, thus reducing the cost of production for the manufacturers.
Thus, an increase in prices of natural gas would not be a good idea and the government would therefore
not opt for this alternative. Instead the subsidies are likely to remain in place.
CRASH IN INTERNATIONALPRICES
The effect of a crash in the international prices would have a negative effect on the local fertilizer
production. The domestic fertilizer manufacturers would stop or reduce fertilizer production because it
would no longer be feasible for them, as the imported fertilizer would be much cheaper. Certain private
small scale importers would import high quantities – reaping high margins in the process and destroying
the local industry. Thus the imports would increase tremendously, as they would be cheaper, destroying
local production of fertilizer.
FERTILIZERUSEBY CROP
The totalcropped area in Pakistanis about22.2 million ha. The share of food grain crops is 54
percent, followed by cotton and sugarcane 20 percent; pulses6 percent; oilseed crops 3 percent;
fruit/vegetables4 percent andother crops about 13percent. Figure9 showsthat wheat is the
main food crop. It occupies about36.3 percent of the total cropped area, followed by cotton with
14 percent, paddy with 9.5 percent, sugarcane with 4.5 percent, maize with 4.5 percent and other
crops with 20.8 percent.
According to the fertilizer use surveyfive major crops: wheat, cotton, sugarcane, rice andmaize
account for about 87 percent of fertilizer consumption.Wheat accounts for about 45 percent
followed by cotton with a shareof 23 percent. Sugar cane is the third crop; nutrientuse per ha is
highest on this crop. The shareof fruit and vegetablesis 5.6 percent (Figure 10).
The yields of the major crops (Table 5) are below their agronomic andgenetic potential. There is a
consensusamong researchers,extensionists and policy plannersthat,given the necessary
resourcesand inputs, yields couldbe increased by 30 to 40 percent.

6. Percentage of cropped area under different crops
FIGURE 10
Fertilizer use by crop (percentage)
Fertilizeruse adoption at farm level
Less thantwo percent of the farmers apply potashwhereas 92 percent apply nitrogen and 83
percent apply phosphate.Half of the farmers apply FYM.Almost five percent apply
micronutrients.The use of green manures,crop residues and bio-fertilizers is negligible (Figure11).
Almost allfarmers having access to canal or tubewell irrigation water use fertilizers. In rainfed
areas scarcely 50 percent of the farmers use fertilizers. About92 percent of small-scalefarmers (<
5 ha) use fertilizers. Application rates decrease with an increase in farm size (rainfed and
irrigated). In rainfed areas the difference between application rates for small and largefarms is
very wide.

7. TABLE 5
Yields of major crops in Pakistan
No. Province
Wheat
Cotton Sugar cane
Rice
Irrigated Rainfed IRRI Basmati
(kg/ha)
1. Punjab 2 562 717 542 48 400 1 928 1 479
2. Sindh 2 417 1 196 759 47 400 2 265 -
3. KPK 1 809 734 436 47 200 2 165 1 985
4. Balochistan 2 031 291 502 50 000 3 037 2 390
5. Pakistan 2 487 721 579 48 100 2 539 1 501
Source: AgricultureStatistics Pakistan 2001-02.
FIGURE 11
Adoption of different sources of plant nutrients by farmers
Fertilizerapplicationrates by crop
The crop-wise per ha use of fertilizer generallyvaries with the farm size, sourcesof irrigation,
educational level,land tenure andcropping system. NFDC occasionally conductsfarm level
surveysto assess fertilizer use by crop and its impact on productivity. The other source of
information is fertilizer deliveries in a specific administrative or ecological zone from which use
per hectare can be calculated.To arrive at the figures of use by crop, all the information available
throughsurveysand fertilizer deliveries hasbeen used. The use on crops in each crop production
zone is given in Table 6.
A comparison between fertilizer recommendations (Table 4) and actualuse (Table 6) shows that
the nitrogen application rate is close to 80 percent of the recommendations, compared with
about40 percent or less, depending on the crop, in the case of phosphate.Ratesof nitrogen

8. application approach recommended rates on irrigated wheat and cotton butare well below the
recommended rates in the case of rainfed wheat. Scarcely two percent of the farmers apply
potash,the small quantities used are applied mainly on sugarcane and vegetablesand fruits. The
N:P2O5:K2O ratio duringthe pastthree years hasaveraged 1:0.28:0.01.
TABLE 6
Fertilizer use by crop in the CPRs
CPR
Wheat
Cotton Sugar cane
Rice
Irrigated Rainfed IRRI Basmati
N P2O5 N P2O5 N P2O5 N P2O5 N P2O5 N P2O5
(kg/ha)
Punjab I 110 40 150 20 150 30 75 18
Punjab II 75 25 120 20 75 10 90 20
Punjab III 90 30 150 15 170 30 80 15
Punjab IV 80 25 30 8
Punjab V 70 20 20 5
Sindh I 120 35 160 30 180 30 100 20
Sindh II 110 30 170 30 120 30
Sindh III 90 30 140 25 160 25 110 20
NWFP I 75 25 40 10 100 20
NWFP II 110 40 140 25 100 20
NWFP III 70 10 25 2
Balochistan I 65 8 25
Balochistan II 60 7 20
Balochistan III 75 20 70 10
FERTILIZERSITUATION:MID APRIL 2018,RABI 2017-18 AND OUTLOOK FOR KHARIF2018
1. SUPPLY/DEMAND SITUATION
Fertilizeroff-take duringMarch,2018
Total fertilizer nutrient off take during March 2018 was about 283 thousand tonnes, which represented an
increase of 21.9 per cent over March 2017. Nitrogen off take increased by 40.4 per cent while phosphate
decreased by 7.3 per cent. Potash off take witnessed a decrease of 10.2 per cent over previous March 2017.
In product terms, urea off take was 342 thousand tonnes, which exhibited an increase of 65.4 per cent.
DAP off take was 150 thousand tonnes, which recordeda decrease of 2.5 per cent over March2017.
Fertilizeroff take during Rabi 2017-18

9. The cumulative nutrient offtake during Rabi 2017-18 was about 2545 thousand tonnes, witnessing a
decrease of 5.0 per cent over the same time frame of Rabi 2016-17. Nitrogen offtake decreased by 1.4 per
cent, whereas phosphate offtake decreased by 13.3 per cent over previous Rabi season. Potash offtake
witnessed an increase of 20.5 per cent. As far as fertilizer products are concerned, urea offtake during Rabi
2017-18 was 2945 thousand tonnes showing an increase of 1.8 per cent and DAP offtake was 1404 thousand
tonnes showing decrease of 12.7 per cent over same time frame of previous season.
Fertilizer productionandImportedSupplies:
Production of all fertilizer products during March 2018 was about 617 thousand tonnes. Out of which, urea
production was 450 thousand tonnes, (72.9 per cent of total products). Other products were: DAP 71
thousand tonnes, CAN 44 thousand tonnes, Nitrophos 42 thousand tonnes, SSP 3 and NPK’s 7 thousand
tonnes. Imported supplies were around 60 thousand tonnes comprising of 51 thousand tonnes of DAP, 2.6
thousand tonnes SOP, 2 thousand tonnes of MOP, 1.0 thousand tonne of AS and 2.4 thousand tonnes of
SSP.
PRICE TREND
Domestic: Prices of urea (sona), urea (other), DAP, NP, SOP and NPK increased by 0.4, 0.8, 3.1, 3.5, 1.3 and
0.9 per cent, while price of SSP (G), CAN decreased by 0.3 and 0.8 per cent as compared with previous
month.
Fertilizer industry voices concern over ‘highest’ Rate of GIDC:
Stakeholders of fertilizer industry have expressed their concerns over what they said high rate of Gas
Infrastructure Development Cess (GIDC) imposed on fertilizer sector and termed it as quite unfair and
discriminatory in comparison to all other industries, whereby it places an unnecessary financial burden on
this essential sector.
"In 2015, as result of negotiations, the fertilizer sector paid over Rs 100 billion to the national exchequer. It
is worth mentioning that the bulk of the fertilizer industry is maintaining its own dedicated pipelines and
spending billions of rupees on installation of compression stations because of the falling gas pressures due
to diversion of gas to power sector from dedicated gas fields," fertilizer industry sources expressed on
Monday.
The gas infrastructure development cess (GIDC) was imposed by the government in 2010 through an
ordinance which was struck down by the Peshawar High Court and the decision was upheld by the
Supreme Court of Pakistan. The Act was passed in 2015 by the Parliament and remains sub-juiced for being
unreasonable and against the government policies. Notwithstanding the legal position, the GIDC act is
highly discriminatory as well, stakeholders of the fertilizer industry claimed.
The federal government had subjected the fertilizer industry to the highest rate of 'gas infrastructure
development cess' (GIDC) as compared to other industries. The GIDC has been imposed at the rate of Rs
300 per mmbtu on feed gas (used as raw-material for urea manufacturing) while a GIDC rate of Rs 150 per
mmbtu is being charged on fuel gas used by all other industries.

10. Moreover, the fertilizer industry is charged higher rate for fuel gas beside this discrimination within the
industrial sector. The GIDC inclusive average gas prices (Rs 488 per mmbtu) are more than double the
international prices (1.5 to 2 dollars per mmbtu) for gas provided to fertilizer sector.
Therefore, high cost of production should in principle lead to higher rates of Urea; however, it is not the
case. When GIDC was imposed, the urea was selling above Rs 2,000 per bag and should have risen to Rs
373 per bag. However, because of government intervention the prices have been brought down to Rs 1400
per bag with a subsidy of Rs 100 and GST reduction of Rs 184 per bag.
Resultantly, the fertilizer industry suffered a loss of Rs 106 per bag in support of subsidy scheme.
Therefore, the fertilizer sector is being burdened with high cost of production that the industry is unable to
pass on, the stakeholders claimed.
The fertilizer manufacturers are the biggest consumers of natural gas because they are using gas as a basic
raw-material to produce urea. They do not burn gas solely as a fuel to operate their factories, hence
making optimal use of our precious gas reserves through value addition. The government must consider
that this industry has invested billions of dollars to play an essential role in agricultural productivity which is
the backbone of the economy. Putting more tax-burden on this industry will also have a negative impact
on domestic and international food-security because Pakistan is a sizeable exporter of agricultural food-
crops.
The GIDC Act 2015 passed by the National Assembly states that the revenues generated through the 'Cess'
shall be utilized by the government for the development of gas-infrastructure which includes major trans-
national projects and LNG imports, etc. However, there is nothing in sight in this regard and fertilizer
manufacturers are not going to benefit from the new infrastructure.