Thursday, February 29, 2024
NewsGov’t mulls fertilizer subsidies

Gov’t mulls fertilizer subsidies

The government is considering subsidies and loan options for farmers to alleviate supply shortages and price hikes in the fertilizer market, the Ministry of Agriculture said.

Earlier this week, the House of Peoples’ Representatives Standing Committee on Agriculture reviewed the ten-month performance report of the Ministry of Agriculture and affiliated institutions.

According to the report, not enough fertilizer is available to meet demands this year. Apart from supply constraints, global fertilizer prices have seen a sharp increase due to the war between Russia and Ukraine.

The budget required to buy fertilizers has increased, while the country is facing foreign exchange shortages, officials at the Ministry told the standing committee.

Speaking on the occasion, Umar Hussein, the Minister of Agriculture, indicated that it is convenient for the farmers to buy fertilizers paying 50 percent up front and the balance on loan. Various activities will be carried out to enable farmers to prepare natural fertilizers.

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Weeks ago, farmers from the south Wollo district of Amhara region told The Reporter that fertilizer is not being supplied in their localities, and even if it does, farmers will not be able to afford it.

The farmers said that unless the fertilizer is provided with loans or government subsidies, they will not be able to grow crops like the previous years.

Farmers had previously bought a bag of fertilizer for 2,300 birr, which they would share among five of them. Nowadays, the farmers reckon that they could not afford it this time around, as the price of fertilizer surged rapidly. 

Out of the 12.9 million quintals of fertilizer purchased in this fiscal year, eight million quintals have been imported, while 2.2 million quintals of fertilizer and 580,000 quintals of improved seeds have been distributed to farmers, according to the Minster.

Ethiopia spent USD 1.2 billion to import fertilizers over the past nine months. The price doubled from last year, following supply turbulences after the war in Ukraine, resulting in farmers’ diminished appetite for fertilizer use.

Prices almost doubled to 4,800 birr per quintal, even though the volume of fertilizer imported this year saw almost five million quintals decline from last year.

The government was forced to procure 12.8 million quintals of fertilizer, of which over 60 percent was supplied by the OCP Group, a Moroccan state-owned company that is in the process of setting up a fertilizer factory in Ethiopia in partnership with the federal government.

The government directly placed an order with the OCP Group to supply the fertilizer, but at a higher price than before. Last year, a ton of urea cost USD 459, but the price has soared by over 180 percent now.

According to Umar, preparations should be made for next summer’s planting season, focusing on the purchase and supply of fertilizers from July to September.

Globally, farmers are warning food prices would increase even further, after seeing the cost of fertilizers increase by more than three-folds. Farmers use fertilizers to grow crops but have been facing rising costs in recent months.

This is partly due to the war in Ukraine, rising wholesale gas prices exacerbated by the war in Ukraine, and disruption of energy exports from Russia increased the production cost of fertilizers. Natural gas is a key component in the production of artificial fertilizers.

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Video from Enat Bank Youtube Channel.

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