Competition in fertiliser supplies shall beef up agro value addition

06Jul 2021
The Guardian
Competition in fertiliser supplies shall beef up agro value addition

IN another change of guidelines in the agricultural sector as in other spheres, the government has lifted controls on fertiliser imports, allowing traders to ship in the input without the usual bidding through the fertiliser Bulk Procurement System (BPS). This was affirmed at the weekend-

-by Agriculture minister Prof Adolf Mkenda, who said that the decision has been made to curb skyrocketing prices occasioned by low production. The rice rise in the international market has to do with the Covid-19 pandemic, which thus complicates benefits of bulk importation.

While the new move is being explained by the government from international market dictates and how it affects local procurement and pricing, there are wider reasons, already noticed in relation to sugar importation, and is also being applied – seemingly – to oil supplies.  It amounts to putting into question the benefits of bulk procurement not as a method but as a policy, as it eliminates competition at the source and demands that traders exercise competition only at the end of the supply chain, which is disingenuous. The contrary is what used to happen, that traders figure out how to mark up prices, and it is unclear if wrong or fake fertiliser was part of bulk procurement or came into traders’ hands by other sources. It can be locally manufactured and added to monopoly supply, etc.

For one thing, bulk procurement diminishes what can be called the brand effect, when everything comes down to being stamped by the regulatory authority as well as the standards offices, and little else besides. Value chains on the other are typically outstretched from the producer, often a multinational firm, which selects a local agent who may also deliver for other suppliers or other kinds of goods (like a general merchant) depending on his sources of capital or business design. That is why for ten years or more there is scant increase in fertiliser production, as those who are charged with regulation work with local producers to tailor their profit requirements by bulk importation.

The minister for instance said that for the 2020/21 season the requirements stand at 718,052 tonnes of fertiliser while actual procurement reached 82 per cent up to end of May, which rapidly implies fighting for the produce at the end of the supply chain. This obviously induces unnecessary cost hikes for farmers, and despite explanation at that level, that Covid-19 hindered production in foreign countries, those who follow business reports on global television will scarcely be satisfied with that explanation. Farms are mechanised, factories are mechanised as well.

If the matter is put down clearly enough, bulk importation and import controls generally hinder expansion of input production as it basically seeks to protect local producers, and often it is the same producers who buy cheaply and combine with their own produce (often of poorer standards) and then sell at monopoly prices. That was the case for sugar, purchasing nearly expiring sugar from Brazil or elsewhere at nearly throw away prices, and then sell at anything above the usual price; in 2016 it reached 5,000/- per kilo in far off regions, due to an artificial shortage. What is true of sugar is true of edible oil importation, fuel importation and now fertiliser importation, same logic. Liberalisation of the market creates real competition and price advantages, not monopoly supply and price hiking.

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