By S. M. Hali
Food security is a condition related to the ongoing availability of food. History is replete with examples of various nations being concerned regarding food security. There is evidence of granaries being established to store grains nearly 10,000 years ago, by the monarchies or central governments in ancient civilizations like China and Egypt who controlled and released food from storage in times of famine.
Despite this serious concern over the availability of food, the term “food security” was established as a formal concept as late as 1974 at the World Food Conference.
According to the UN’s Food and Agriculture Organization (FAO) “Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.”
Pakistan is an agrarian society but according to the recent National Nutrition Survey, around 60 per cent of Pakistan’s total population is facing food insecurity, and in these households, almost 50 per cent women and children were malnourished, facing stunting (short height for age), wasting (low weight for height) and micronutrient deficiencies.
The poor performance of the agro sector, despite the emphasis on food security, results because of a lopsided national fertilizer policy. The government had announced its first Fertilizer Policy in 1989 where the discount to new plants on feed stock was in justified quantum. The same was also adopted in the 2001 policy. The most recent surveys however, indicate that Pakistan will face half a million metric tons urea fertilizer shortfall during kharif season 2014 due to the curtailment of natural gas supplies to the fertilizer plants. The predicament has arisen because of mismanagement and the absence of level playing fields for the old and new fertilizer plants as promised in Fertilizer Policy, 2001.
The organization that can remedy the situation is the Competition Commission of Pakistan (CCP), which should take immediate notice of discriminatory treatment to certain old fertilizer companies regarding supply of gas, putting certain units at disadvantageous position as compared to new units. Even a cursory glance at the Competition Act of 2010 depicts that the government’s handling of the fertilizer policy contradicts provision. Discrimination is established if any competitive edge has been given by the government to certain plants under the policy. Under section 29 of the said Act, the CCP is legally empowered to issue the Competition Advise in view of the competition concerns and to prevent or eliminate anti-competitive behaviour. The same section under reference also authorizes the CCP to advise the government to withdraw its discriminatory policy. Any discriminatory policy that result in putting a segment of business into a disadvantageous position deems anti-competitive and CCP has the power to intervene in favour of fair competition. In case of a government ministry or department introducing such a discriminatory policy, the CCP has the legal authority and powers to issue a Policy Note.
Competition Act 2010 also empowers the CCP to issue the Policy Note to the relevant government departments in case the discriminatory treatment to some old fertilizer companies is proved. Since legal powers are involved, the intervention of the CCP entails thorough investigation based on industry records by seeking inputs of all relevant government departments and ministries by CCP.
With the advent of 2014, acting upon the dictates of the IMF, the government of Pakistan has raised the Gas Infrastructure Development Cess (GIDC) on gas consumers (excluding domestic and commercial) by 52% to 100%. Its direct fallout has caused the difference of cost between urea bag prices between old and new plants to have risen to approximately Rs 410 per bag or 8.2 million/MT of urea or approximately 14.8 billion considering new plants production capacity in the country. When feasibility of any project is appraised, future cash flow is calculated on account of Government policies and any benefit it could provide. At the time of policy formulation (2001) the discount between old and new plants feed gas prices was about Rs 50 per bag which was within reasonable limits but the government has disregarded this basis resulting in heavy impairment of approximately 13.0 billion per year to GOP and denial of level playing field for some Urea manufacturers.
Ironically, the Ministry of Industries and Production has proposed the import of 0.7 million metric tons of fertilizer urea for kharif season in order to avoid shortage. This will burden the national exchequer by around $280 million, which will cause a sudden surge in its prices in the local market, further aggravating the crisis.
The need of the hour is that in order to ensure food security, the government ensures the provision of fertilizers to the agriculture sector by removing the huge difference in production cost between old and new plants where the latter have an unfair advantage of gas subsidy.