Background

His Majesty's Government of Nepal deregulated the fertilizer trade in November 1997 as agreed with the Asian Development Bank under its Second Agriculture Program Loan. Under this loan, not only the government phased out fertilizer subsidies completely, but also removed AIC's monopoly in the fertilizer market. Nevertheless, the country continued to experience  uncertainties in fertilizer supplies for some reasons. This led the Government to formulate National Fertilizer Policy 2002 (hereafter NAFP) to ensure supplies of quality fertilizer (production, import and distribution) in the country for increasing  agricultural production. 

Approved by the Government on 28 February 2002 (Falgun 16, 2058 BS), the principal objective of  the NAFP is to enhance agricultural productivity through improvements in soil fertility, and thereby contribute to the national goal of poverty alleviation. Specifically, this policy aims to: 

(a) Provide conditions (policy and infrastructure management) for enhancing fertilizer consumption; and

(b) Promote integrated plant nutrients management system for the efficient and balanced use of fertilizers.

Key Features of the Policy

1 Broad-based definition of fertilizers 

While the earlier policy focused on chemical fertilizer only, one of the most important feature of the NAFP is to broaden the definition of fertilizer with the adoption of a broad-based definition for fertilizer. For the NAFP, "Fertilizer" means three types of fertilizers namely, organic, chemical and microbial (fertilizers) fertilizers. 

2 Fertilizer, a free entity 

With the deregulation of the fertilizer trade in 1997, fertilizer has already become a free entity which can be imported by any one in the country. The sole condition put by the government for importation of fertilizer is the need to follow specifications of fertilizer, otherwise the import is free and there is no licensing requirements for importing fertilizers into Nepal. For the  fertilizer whose specificationis  not approved by the government, one is required to register with the Ministry of Agriculture and Cooperatives before importing into the country. 

3 Provision of buffer stocks 

In order to deal with uncertainty situations in supplies of chemicalfertilizer  and seasonal and location specific shortages, NAFP requires the government to hold a buffer stock of  chemical fertilizers subject to interruptions in transport access.  With regard to the management of the buffer stock fertilizer, NAFP's strategies include the following: 

(a) Hold about 20 percent of the estimated annual  chemical fertilizer consumption as buffer stock 

(b) Make storage, management and distribution of buffer stock transparent and competitive.

(c) Manage grant-aid chemical fertilizer made available to His Majesty’s Government as buffer stock (managed in the form of buffer stock fertilizers) and mobilize accordingly.

4 Domestic production of fertilizers

While it would not be appropriate to depend always on imports to meet fertilizer demands, in Nepal, domestic production of chemical fertilizers seems at remote. The country does not possess any raw materials to produce chemical fertilizers. Relatively small size of Nepal’s demand would make Nepal further a high cost producer. Nevertheless, the policy suggests the following with regard to the domestic production of  chemical fertilizers: 

(a) Encourage the establishment of a fertilizer plant in the country.

(b) Give equal facilities and opportunities to the producers of mixed or blended fertilizers for importing fertilizers as raw materials, as available to other importers of fertilizers.

5 No direct subsidies on fertilizers
Having initiated to phase out direct subsidy on fertilizers in November 1997, the government completed a total withdrawal of direct subsidies on all fertilizers with effect from October 17, 1999 (Kartik 30, 2056). Government does not provide direct price subsidies on any kind of fertilizer.

6. Support to targeted areas and targeted groups
In view of the need to support targeted areas such as remote and mountainous districts whose district headquarters are not linked yet with the all weather motorable road and to support targeted groups such as small and marginal farmers who can't afford to buy costly fertilizers, the NAFP underlines the need for supporting them through special agricultural production programs. With regard to supporting targeted areas and targeted groups, the NAFP reiterates the following:

(a) Provide fertilizers at concessionary rates in the districts of hills and mountain regions whose district headquarters are not yet linked with a permanent motorable road.  The concessionary rates will be equivalent to the cost of transporting fertilizer to these districts.

(b) Make all types of solid fertilizers containing nitrogen, phosphorus and potassium eligible for the fertilizer transport cost concessions.

(c) Provide opportunities to the cooperative and private sector to take part in the distribution of fertilizers provided under concessionary rates.

(d) Consider the possibility of providing fertilizer on concessionary rates to small and marginal farmers.

7  Promotion of the Integrated Plant Nutrients Management System (IPNMS) 

Although use levels of chemical fertilizers in Nepal is low at present, it will not remain so  in the future too. Reliance only on chemical fertilizers in attaining this Agricultural Perspective Plan (APP) target would signal for potential environmental hazards. APP requires to raise fertilizer use level to almost 131 Kg of plant nutrients per hectare by 2014/15. This is quite high.. Emphasizing IPNMS,  NAFP suggests to use chemical fertilizers judiciously and efficiently with sufficient compost or farm yard manure. The basic concept underlying IPNMS is the maintenance or adjustment of soil fertility and of plant nutrient supply to an optimum level for sustaining the desired crop productivity through optimization of the benefits from all possible sources of plant nutrients in an integrated manner. 
 

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