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Fertilizer Industry

Overview

The fertilizer industry of Pakistan has enormous potential and is well on its way to becoming one of the biggest fertilizer exporters in the region in the coming years. Factors that are directly contributing to these forecasts are the recent issuance of LNG regasification licenses and the establishment of new fertilizer plants by prominent organizations within the country. Being primarily an agrarian state, Pakistan's growth is heavily dependent on the fertilizer industry. According to reports, Pakistan's fertilizer demand has always remained higher than its supply. However, with the advancement of technology and increased number of players in the industry, production capacity has increased to approx. 9 million tons per year, which has consistently surpassed the national demand over the last few years. (refer section production vs. capacity) Furthermore, the consumption of fertilizer has increased manifold due to heightened awareness among farmers that its usage in good quantity is fruitful for higher yields and a significant increase in their income as the commodity is provided subsidized rates. During FY 2018, cumulative sales of urea increased by 40% to 6.3 million tons and DAP sales edged to 6% to 2.3 million tons. Moreover, a further pick-up in demand for urea can be foreseen. Also, comfortable inventory levels of urea and DAP have reduced pricing power for local fertilizer manufacturers and as a result, average urea price has increased by 10-11% year-on-year. At present, international urea and DAP prices were hovering around $218 and $335 per ton(avg. annual price), respectively, and are expected to remain steady which, along with removal of price cap (Rs 1,400 per bag) from urea, would provide an added advantage to local manufacturers. In fact, for farmer the government of Pakistan has provided subsidy. 

 

Agriculture Credit / Fertilizer Sector Share

Agricultural credit is one of the most important instruments to achieve higher productivity. Its availability at the time when needed is crucial for gaining maximum benefits. Credit requirements of the farming community have been increasing continuously over the period of time. This might be due to rise in the prices and use of costly agricultural inputs. State Bank of Pakistan is the main governing body in the country, which ensures the availability of agricultural credit to farmers. Zari Taraqiati Bank Limited (ZTBL), Commercial banks, Cooperatives and Domestic private banks are providing credit facility to the farmers for meeting their credit needs. Supply of institution-wise agricultural credit disbursement during 2015-16 and 2016-17 is presented. Agricultural loans of Rs. 704.5 billion were disbursed during 2016-17 as against Rs. 598.3 billions during the last year (2015-16), thereby registering an impressive increase of 17.8 %. The share of commercial banks and ZTBL was 48.6 and 13.1 %, whereas the share of private Banks was 19.7 %. Share Micro Finance Banks, Islamic Banks and Rural Support Programmes was 12.5, 1.7 and 2.8 %respectively. 

Agriculture Credit / Fertilizer Sector Share

It may be observed that out of the total disbursement during 2016-17, 92 per cent was for production loan and 8 % for development loan. Production loan is for short term of 6 to 18 months for farm inputs seed, fertilizer, pesticides, POL, Labour and Poultry feed chick’s etc. Of the total production loan, about 40 % goes to fertilizer. Therefore, it is estimated that about Rs. 260 billion have been provided for fertilizer sector. The data presented also indicate that almost the all banks have achieved their targets. Overall target achievement was 100.6 %.

 

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