ISLAMABAD, August 5: The Competition Commission of Pakistan (CCP) has released a draft report titled “Competition Assessment Study of the Fertilizer Industry in Pakistan” for stakeholder and public comments. The study highlights key competition-related challenges in the fertilizer sector and proposes recommendations to improve efficiency and promote fair competition.
Pakistan’s fertilizer plants have a combined production capacity of 9.4 million tonnes per year. Fertilizer production during July–March FY2024 was 7.1 million tonnes, 16.6 percent higher than the same period in FY2023. Fertilizer contributes 30 to 50 percent to crop yield. According to the Pakistan Bureau of Statistics, about 50 percent of fertilizer is used for wheat, 25 percent for cotton, 8 percent for sugarcane, 6 percent for rice, and 1.5 percent for maize.
The report identifies barriers to competition at three levels—production, distribution, and retail.
- Structural barriers: high capital costs for new plants, reliance on natural gas supply, and location of plants.
- Regulatory barriers: outdated Fertilizer Policy 2001, discriminatory feed and fuel gas pricing, and weak policy framework.
- Other barriers: black marketing of imported urea, hoarding and smuggling of local urea, and lack of adequate buffer stock.
- Strategic barriers: disputes such as the Gas Infrastructure Development Cess (GIDC).
- Market behavior: alleged tie-in sales by manufacturers and anti-competitive conduct by dealers.
The study notes that fertilizer companies continue to enjoy high profits, reflecting weak competitive pressure. Price trends and market characteristics call for close monitoring to safeguard competition.
The report recommends:
- Revising the Fertilizer Policy 2001 and introducing a new policy aligned with changes in the gas sector.
- Ensuring fair access to natural gas and LNG imports, with prices based on the weighted average cost of gas.
- Incentives for energy efficiency and environmental sustainability.
- Strengthening monitoring mechanisms for urea supply to prevent artificial shortages and black marketing.
- Greater coordination among government departments.
- CCP investigations and enforcement where violations of the Competition Act, 2010, are suspected.
The draft report is available on CCP’s website. Stakeholders and the public can submit comments within 15 days of its publication. CCP will continue to engage with stakeholders to support pro-competition reforms in the fertilizer sector, in line with international best practices.
The report can be accessed at https://cc.gov.pk/assets/images/Downloads/assessment_studies/Fertilizer%20Industry%20Report%2029-07-25.pdf
