On

Fertilizer Scenario of Bangladesh

Submitted to:
Dr. Jahangir Alam
Adjunct Faculty
Dept. of Agribusiness & Marketing
Sher-e-Bangla Agricultural University

Submitted by:
Most. Iffat Ara Ila
Reg. No: 07-02288
MS-semester 1
Dept. of Agribusiness & Marketing
Sher-e-Bangla Agricultural University

Date of Submission: 30-07-2012

Fertilizer Scenario in Bangladesh

Introduction:
Bangladesh is densely populated and agriculture based country. Agriculture is the main
source of livelihood for more than 80% of the country's population. The main purpose of
agriculture is to provide food for the increasing population. Fertilizer is considered one of
the main inputs for increasing crop yields and farm profit. To understand the role of
fertilizer for increasing production we can cite the Nobel prize-winning wheat scientist
Dr Norman E Borlaug's dialogue as "If the high yielding wheat and rice varieties were the
catalyst that ignited the Green Revolution, then chemical fertilizer was the fuel that
poured its forward thrust". This is also true for Bangladesh agriculture because the
country has virtually no possibility of increasing its cultivable land area. So, the food
production of this country can be increased through increasing irrigation facilities
together with HYV and greater use of fertilizer.

Fertilizer:
Broadly a fertilizer may be defined as any substance (chemical, organic and microbial)
that is added to soil to supply elements required for the nutrition of plants.

Some common types of Fertilizer:

Inorganic Fertilizer: This kind of fertilizer contains nutrients in the form of

inorganic salts.
Organic Fertilizer: This is carbonaceous materials mainly of vegetable or animal
origin.
Micronutrient Fertilizer: It contains micronutrient elements like Boron, Iron,
Copper etc.
Complete Fertilizer: Contains three major plant nutrients- N, P, and K.
Compound Fertilizer: Contains at least two of the plant nutrients N , P & K.
Granular Fertilizer: Solid material that is formed into particle of a
predetermined mean size.
Bio-fertilizer: These are non-pathogenic active cultures of microorganism which
benefit the plants by providing N , P or rapid mineralization of organic material.
Liquid Fertilizer: These are available in the form of suspension or solution.
Soil conditioner: Material added to soil, to improve their physical/chemical
properties & their biological activity.
Powder: A solid substance in the form of very fine particles. These are also
referred to as non-granular fertilizer

Benefits of Balanced use of fertilizer:

Fertile soil is a prerequisite for obtaining satisfactory yield of a crop. A soil is called
fertile when it supplies nutrients in an adequate amount, with a suitable proportion.
Fertilizers are applied to soil to enhance ability of a soil to supply nutrients to plants
adequately as well as proportionately in order to overcome nutrient deficiency and to
ensure higher crop yield. Balanced use of fertilizers has so many benefits. Some are as
follows:

Increase crop yields.

Increase crop quality.
Increase farm income.
Correct inherent soil nutrient deficiencies.
Improve soil fertility.
Avoid damage to the environment
Restore productivity of land

Disadvantages of using chemical fertilizer:

Fertilizer use actually has no demerits. But excess or uncontrolled use of fertilizers can
suffer the plants. Besides these chemical fertilizers also:

Spoil the soil properties, osmotic pressure, pH, conductivity and water holding
capacity.
It can damage water and water resources.

It may also affect adversely on population of microorganisms & other parameter.

Fertilizer use in Bangladesh:

Inorganic fertilizers have been introduced into this country during early 1950s as a
supplemental source of plant nutrient. But their use started increasing only from the mid
1960s along with the introduction and expansion of modern varieties accompanied by
the development of irrigation facilities. Until 1980, three major primary plant nutrient
( N,P,K) along with one secondary nutrient (Ca) were supplied from fertilizer to the soil.
Recently, the deficiencies of Mg, B & Mo have been reported for some soils & crops.
Prior to 1990, only TSP was the source of P but after 1990 SSP was introduced as an
alternative source. But granular SSP was banned for sometime in the country for
adulteration.

Common Fertilizers used in Bangladesh:

Nitrogen, Phosphorus, Potassium, Sulphur are commonly used in our country. Besides
these, Ca, Mg, Zinc, Boron, micronutrients like Fe, Mn, Cu, Mo, Cl etc are also used. But
main are N,P,K.

Used amount of chemical fertilizers (2010-2011):

Name

Amount(000 m. ton)

Urea
TSP
DAP
MoP
NPKS
AS
Zipsum
Zinc

2700
500
300
400
150
20
130
50
Total=4250 (000 m. ton)

Production & Import of chemical fertilizers by types (2010-2011):

Production
Name

Urea

Import

Amount
(lac m.
ton)

Amount
(lac m. ton)

15

Total
( Lac m. ton)
22

Production
%

Import
%

31.82

68.18

PS=3.11
TSP

DAP

59.13
5.26

11.41

0.60
BADC=1.55

29.47

PS=2.11

56.88

0.35

3.71

9.43
33.7

BADC=1.25

63.13
MoP

PS=2.14

0
3.39

BADC=1.25

36.90

Fertilizer Subsidy in Bangladesh:

domestically produced urea is subsidized twice:
(a) The natural gas used to manufacture urea is sold to the five fertilizer factories at a
subsidized rate; and
(b) The ex-factory price fertilizer dealers pay is subsidized at a level lower than the cost
of production;

Imported urea is subsidized to make the price the fertilizer dealer pays the same as
that of domestically produced urea;

Imported TSP, MP and DAP receives a fixed subsidy which, for many years until
late 2008, had been set at 15 per cent of the import cost.

The cost to government of subsidizing imported fertilizer obviously varies with the
international price .

Problems with the subsidy system:

There are a number of problems with the subsidy system:

It has encouraged inefficiency in the domestic production of urea. Not all factories
are equally efficient and the relatively inefficient ones receive comparatively
higher subsidy. Thus the subsidy is more than absolutely necessary, leading to
waste of resources and a high fiscal cost for Government.

The relatively higher subsidies given to urea, compared to TSP and MP, in recent
years has led to unbalanced fertilizer use by some farmers, which has probably
depressed yields and may have adversely affected soil fertility.

Fertilizer Distribution System:

Until the late 1970s, fertilizer procurement and distribution was a public monopoly of the
Bangladesh Agricultural Development Corporation (BADC). Because the system was
inefficient and was not able to cope with the increasing farmer demand for fertilizer, the
Government introduced a series of reforms in the 1980s, resulting in a largely private
sector and unsubsidized system by the early 1990s. However, the Government took over
control and regulation of the fertilizer marketing system, following an unprecedented
urea shortage in 1995 caused by (a) poor monitoring of fertilizer demand and availability,
and (b) the export of domestically produced urea, despite high demand at home.
The current fertilizer marketing and distribution system is as follows:

the Bangladesh Chemical Industries Corporation (BCIC) is responsible for

domestic production of urea and TSP and import of urea, while the Bangladesh
Fertilizer Association (BFA) and BADC imports non-urea fertilizer;
fertilizer factories sell fertilizer to 4,800 upazila fertilizer dealers (10-15 per
upazila), appointed by BCIC on the recommendation of the Governments
Fertilizer Monitoring Committee;
the fertilizer dealers, in turn, serve 14,000 block or union level sale
representatives (sub-dealers) who sell to farmers at a rate fixed by farmers;
Farmers are given a certificate by Department of Agricultural Extension staff
enabling them to buy fertilizer at the subsidized price in proportion to their
fertilizer requirements.

Although there has been no repeat of the crisis of 1995, there are problems with the
system:

farmers frequently complain of fertilizer shortages (due to many factors,

including weak forecasting of demand, problems in smooth import of fertilizer
and rules that prohibit sale of fertilizer across upazila boundaries);
the current system involves high management costs to sustain the policies and
controls. A major problem is that local agricultural extension staff are
preoccupied with managing and controlling fertilizer distribution at the union
level and thus their primary responsibility of providing agricultural extension
support to farmers is seriously hindered.

Distribution and marketing flowchart for urea fertilizer:

Local production

BCIC

import
(6 factories)
Factory gate and buffer stocks
in district godown

National committee gives

allotment
to the District Fertilizer & Seed
Monitoring Committee

District committee
gives allotment
to the Upazila
Fertilizer & Seed
Monitoring Committee

BCIC dealers collect

fertilizer from factory
dealers at union level
gate and buffer godown

Retailers
Farmers can buy fertilizer from
both dealers and retailers

Upazila
committee gives allotment
to the BCIC

Distribution and marketing flowchart for non-urea fertilizer:

Local production

Private import

& BADC
(1 TSP & 1 DAP factory)

Importers warehouse, Factory gate & BADC godown

National committee gives

allotment
to the District Fertilizer & Seed
Monitoring Committee

District committee
gives allotment
to the Upazila
Fertilizer & Seed
Monitoring Committee

BCIC dealers collect

fertilizer from warehouse
union level
factory gate .BADC dealers
collect only from BADC godown

Upazila
committee gives allotment
to the BCIC dealers at

Retailers
Farmers can buy fertilizer from
both dealers and retailers

Supply Chain of Fertilizer:

Fertilizer intermediaries:
Factories: The Bangladesh Chemical Industries Corporation (BCIC) is responsible for
fertilizer production and the operation of six urea fertilizer factories, one TSP and one
DAP plant in the country. Distribution of BCICs fertilizer production is made from the
factory gate to the appointed dealers at prices determined by the Government. The
BCICs production is uneven, rarely producing at a rated capacity. Production and import
of urea is always controlled by the government and is distributed to the farmers through
the 4850 BCICs appointed dealers at heavily subsidized rates. Moreover, the production
of small quantities of TSP, SSP and DAP are also at the governments command.

Importers: Bangladesh imports all of the DAP, MoP and a part of SSP and Gypsum,
Zinc, and Ammonium sulphate (AS). Import and marketing of a portion of the TSP, DAP
and other fertilizers (MoP, SSP, Gypsum, magnesium sulphate and micronutrients) are
controlled by the private sector. The government determines the requirement for different
fertilizers for a budget year and then allows importers to meet up the demand. There are
140 importers in Bangladesh. Currently, the importers import DAP and zinc from USA,
TSP from China, MoP from CIS, SSP (powder) and Gypsum from India, and AS from
Korea according to the annual needs of the country.

Dealers: The fertilizer dealers are usually large, affluent traders. They invest large
amounts of capital in their businesses. They have their own warehouses. They either lift
their fertilizers from local factories or import them from abroad. In case of urea and TSP,
they only collect the Delivery Order (DO) for lifting fertilizer, from factory and sell them
to subdealers. Their activities are concentrated in the local market. In fact, they are the

traders who mainly control the fertilizer market. The dealers purchase a fixed portion of
the fertilizer from the factories and another portion of fertilizers from the importers.

Sub dealers: The sub-dealers are the smaller traders. Their investment is much smaller
than those of the union dealers. They purchase fertilizer mainly from wholesale dealers.
Occasionally, they collect fertilizer from the factories or import fertilizer through joint
initiatives. Shamsul Alam, et.al. (2007) found that on an average sub-dealers purchased
80% from dealers. They sell fertilizer to the farmers at fixed prices.
Generally, farmers collect fertilizers from three different sources:
BCIC appointed fertilizer dealers and their representative (sub-dealer) shops
BADC dealers shops
Local fertilizer retailers shops

Problems in Fertilizer Business:

The fertilizer business is bedeviled with a lot of problems. These include:
Deficiency in supply of fertilizers;
Price variations across different geographical areas;
Wastage due to poor and inadequate storage facilities;
Subsidy diverted to unintended beneficiaries;
Fertilizers sold above government approved prices;
Inadequate supply of fertilizers by quotas allocated to dealers in various districts;
Interference with the distribution mechanism by well-connected people, political
heavyweights, and personnel entrusted with fertilizer sales;
Same fertilizer type for all farmers irrespective of crop grown and soil type;
Inaccurate assessment of the demand for fertilizer;
Knowledge gap of the farmers;
Relatively high price of fertilizer;
High transportation cost;
Adulterated fertilizer;
Faulty lifting procedure of fertilizer;
Frequent change of distribution system; and
Smuggling and black marketing.
The major reasons behind these problems are (i) lack of proper management and (ii)
surveillance in fertilizer marketing and distribution system. The overall problems are:
Unnecessary delay in fertilizer procurement in right time and right quantity;
Delays in distribution due to poor transport facilities;
Artificial crisis created by the private importers and dealers to reap supernormal

profit;

Subsidized prices are usually below the market-clearing price hence encouraging

traders to make enormous profits by buying low and selling exorbitantly;

Quantity demanded does not match quantity supplied, putting severe pressure on
price to increase;
Inadequate and weak provisions to prosecute guilty officials and traders found to
have illegally sold fertilizers by diverting it to middlemen or highest bidders;
Widespread availability of the illegal fertilizer in the market, at illegal prices
without police and legal prosecution;
Government monopoly of urea fertilizer production; and
Politicization of the procurement and distribution process.

Recommendations:

Design a rational fertilizer pricing policy;

Monitor fertilizer price, supply and demand situations in the market;
Keep information on market behavior at import levels and on distribution
network;
Design measures that can promote market competition;
Monitor practices of delivery of fertilizers at factory gates (for urea) and world
prices, supply etc. on fertilizers;
Select dealers in a candid and non-discriminatory way;
Strengthen market information and monitoring;
Ensure price stability through maintenance of buffer stock;
Develop and implement a training program for dealer and sub-dealers;
Coordinate fertilizer production, distribution and marketing by regular
monitoring;
Supply and availability issues of fertilizer to be clearly identified and properly
addressed;
Continue applying principles of market forces ;
Guide quality legislation;
Improve fertilizer distribution system. Fertilizers are to be supplied to dealers
from the nearest buffer stocks instead of different plants. It can reduce shipment
time and transportation cost of fertilizer;

For efficient marketing and distribution of fertilizers at right quantity, at right time and
at right place some further recommendations can be made:

 Involvement of Agriculture Extension workers needs to be lessened to allow them

to give attention to the dissemination of technology information. SAAOs should
be released from fertilizer marketing activities.
Smuggling, black marketing and syndication of fertilizer need to be stopped
through strong monitoring.
Number of dealers in each upazila should be increased.

Farmers are often deceived of the quality and prices of fertilizers especially

regarding non-urea fertilizers. Hence, regular monitoring and effective legal

measures will be helpful in addressing this issue.
Inspect markets for detection of adulteration of fertilizers. High adulteration for
mixed fertilizer (NPK) must be controlled and unscrupulous traders must be
punished.

Alternative to chemical fertilizer:

Organic fertilizer:
Organic fertilizers include naturally occurring organic materials, (e.g. chicken litter,
manure, worm castings, compost, seaweed, guano, bone meal) or naturally occurring
mineral deposits (e.g. saltpeter).

Benefits of organic fertilizer:

Organic fertilizers have been known to improve biodiversity (soil life) and longterm productivity of soil and may prove a large depository for excess carbon
dioxide.
Organic nutrients increase the abundance of soil organisms by providing organic
matter and micronutrients for organisms such as fungal mycorrhiza,(which aid
plants in absorbing nutrients), and
Can drastically reduce external inputs of pesticides, energy and fertilizer, at the
cost of decreased yield.

Disadvantages of organic fertilizers:

Organic fertilizers may contain pathogens and other disease causing organisms if
not properly composted
Nutrient contents are very variable and their release to available forms that the
plant can use may not occur at the right plant growth stage
Organic fertilizers are comparatively voluminous and can be too bulky to deploy
the right amount of nutrients that will be beneficial to plants
More expensive to produce

Public & Private Sector:

Bangladesh Fertilizer Association (BFA):
The Association shall be organized on all Bangladesh basis and may have branches
anywhere in Bangladesh. There shall be two categories of voting members: Ordinary and
Associatiate member.:
Objective : To protect, develop, support and promote all measures and steps towards
open/free competitive marketing, trade and manufacture of all fertilizers and plant
nutrients in Bangladesh and to co-ordinate the efforts of the members of the Association
towards this end.
Purpose : Bringing together and to represent all sectors of fertilizer trade and industry
including distributors, merchants, importers and exporters, supply agencies and
manufacturers.
Type : A non-profit, non-political organization financed through the subscription by its
members.
Units : District units all over the country to provide services at grassroots level and to
ensure satisfactory marketing of fertilizers all over the country

Representation :Represented in different Government Committees related to policy

making and other agricultural development activities. Government has made BFA
membership compulsory for fertilizer manufacturers, importers & dealers for better
monitoring of their performance.
Participation with Int'l Organization : worked with FAO under a project named ASIRP
in obtaining the results of research on nutrient needs & fertilizer use on crops and soils as
well as to disseminate such information to farmers, dealers, distributors and merchants to
improve fertilizer use efficiency & to improve crop and food production.

Bangladesh Chemical Industries Corporation (BCIC):

Bangladesh Chemical Industries Corporation fully owned by the Government. It was
established in July 1976.The Corporation is now managing 13 large & medium size
industrial enterpriss engaged in producing a wide range of products like urea, TSP, paper,
cement etc.

Fertilizer factories under BCIC:

Chittagong Urea Fertilizer Ltd--Rangadia, Anwara, Chittagong.

Jamuna Fertilizer Company Ltd--Tarakandi, Jamalpur.
Ashugonj Fertilizer & Chemical Com. Ltd--Ashugonj, Brahmanbaria.
Urea Fertilizer Factory LtdGhorasal, Narsingdi.
Natural Gas Fertilizer Factory LtdFenchugonj, Sylhet.
Polash Urea Fertilizer Factory LtdPolash, Narsingdi.
TSP Complex LtdNorth Patenga, Chittagong.
DAP Fertilizer Com. LtdRangadia, Chittagong.
Private EntrepreneurHussain Chemical, Fatulla.
Joint VentureKAFCO, Rangadia,Chittagong

Bangladesh Agricultural Development Corporation (BADC):

It was established in1961.The mandatory or primary functions of BADC are: to make
suitable arrangements throughout Bangladesh for the production, procurement, transport,
storage & distribution of essential agricultural inputs such as-seeds, fertilizers .

References:

A.Kafiluddin & M.S. Islam. 2008. Fertilizer Distribution, Subsidy, Marketing,

Promotion and Agronomic Use efficiency Scenario in Bangladesh.Bangladesh
Fertilizer Industry Association (IFA), Melbourne, Australia.
Barkat.A :Faridi.R & Wadud.S.N & Sengupta.S.K & Hoque.S.N.M.E. 2010. A
Quantitative Analysis of Fertilizer Demand and Subsidy Policy in Bangladesh.

Manob Sakti Unnayan Kendro.

Jahiruddin.M:Islam .M. R & Miah M. A. 2010. Constraints of Farmers Access to

Fertilizer for Food Production. Department of Soil Science.Bangladesh
Agricultural University.
Asaduzzaman
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&
Shahabuddin.Q
&
Deb.
U.K
&
Jones.S.2009.InputPricesSubsidies and Farmers' Incentives. BIDS policy Brief.
Fertilizer Recommendation Guide-2005.
Bangladesh Economic Review-2011
www.badc.gov.bd
www.bcic.gov.bd
www.moa.gov.bd
www.bfa-fertilizer.org/
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