The Competition Commission of Pakistan (CCP) has sought stakeholder and public comments of a draft report, “Competition Assessment Study of the Fertilizer Industry in Pakistan,” highlighting key competition-related challenges in the fertilizer sector and proposes recommendations to improve efficiency and promote fair competition.
According to the report, Pakistan’s fertilizer plants have a combined production capacity of 9.4 million tons per annum. Fertilizer production during July–March FY2024 was 7.1 million tons, 16.6% higher than the same period in FY2023. Fertilizer contributes 30-50% to crop yield. The Pakistan Bureau of Statistics states that around 50% of fertilizer is used for wheat, 25% for cotton, 8% for sugarcane, 6% for rice, and 1.5% for maize.
The report has identified barriers to competition at three levels—production, distribution, and retail. It highlights structural barriers of high capital costs for new plants, reliance on natural gas supply, and location of plants and regulatory barriers pertaining to the outdated Fertilizer Policy 2001, discriminatory feed and fuel gas pricing, and weak policy framework.
Among other barriers, the report cites black marketing of imported urea, hoarding and smuggling of local urea, and lack of adequate buffer stock. Strategic barriers have been identified as disputes arising from policies such as the Gas Infrastructure Development Cess, while market behavior refers to 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 has recommended revising the Fertilizer Policy 2001 and introducing a new policy aligned with changes in the gas sector. Additionally, it proposes ensuring fair access to natural gas and LNG imports, with prices based on the weighted average cost of gas. Further recommendations include 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; and CCP investigations and enforcement where violations of the Competition Act, 2010 are suspected.
The draft report is available on the 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.