Comparison between India and Ethiopian fertilizer use

Shawel Betru International Environmental

Economics

India

Agricultural in India

• Indian agricultural policy has dramatically changed before and after 1947 independence – Focus from export crops to food crops – Food security has guided overall policy – High government involvement

• New Agricultural Strategy: – Chemical fertilizer– high yielding variety– Irrigation

Overview of fertilizer policy, India

Period Policy

1957 Fertilizer control order (distribution and price)

Before 1970 Price control for Nitrogen fertilizer

Oct 1970 Review of fertilizer policy Common fertilizer pool

1973 Reintroduction of distribution control (Essential commodity act (ESA)), fertilizer movement control order)

1974 Fertilizer pool equalization charge (FPEC)

Jan. 1976 High Power Fertilizer Prices committee

1977 Review of price control

Retention price scheme for nitrogenous fertilizers

1987-88 Free allocation of specific quantity of fertilizers for Rabi (spring) and Kharif (autumn)

1988 Revision of price control

1991 Price decontrol for low analysis nitrogen fertilizers

Sept 1992 Import liberalization for raw materials

1994 Decontrol price increase, price of urea increased

Nitrogen fertilizer growth

19611965

19691973

19771981

19851989

19931997

20012005

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

consumptionproduction

Nitr

ogen

ferti

lizer

(Mill

ion

t)

Increasing production of fertilizer

• Caused by – Commissioning of new gas based plants in 1980s– Increasing capacity utilization 60% in 1970 to 90%

in 1990s • Most of nitrogen fertilizer production is

controlled by public sector – Lower capacity utilization

Present trends

• Decreasing and abandoning fertilizer subsidy • Changing feedstock from naphtha and coal to

LNG• Joint venture aboard: Senegal, Jordan, Iran

and Oman

Ethiopia

Fertilizer policy, Ethiopia

• The first comprehensive fertilizer policy was introduced in 1993 by TGE (transitional government)

• Between 1985-1993 the parastatal corporation called AISCO completely and officially controlled fertilizer sector

• 1993- fertilizer subsidy was introduced – Meant to offset effect of currency devaluation– Subsidy did not exceed 25% of unsubsidized price

• 1997-1998- price decontrol was made

Fertilizer production and import

• There is no production of inorganic chemical fertilizers in Ethiopia

• In 1993 the government and WB intended to establish fertilizer factory

• but there is no fertilizer factory in Ethiopia and therefore, all inorganic fertilizers.

Cereal yield growth, Ethiopia

19931995

19971999

20012003

20052007

0

5000

10000

15000

20000

25000

30000

BarleyTeffMaizeMilletOatsRice, paddySorghumWheat

Cere

al y

ield

(t/h

a)

Harvesting land

1993

1995

1997

1999

2001

2003

2005

2007

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

BarleyTeffMaizeMilletOatsRice, paddySorghumWheat

Har

vest

ing

lan

d (

mil

lion

ha)

Import and marketing

• Fertilizer import in Ethiopia is controlled by parastatal companies

AISCO

Dinsho (oromia) Wondo ( South )Ambasel (Amhara) Guna ( Tigray)

YARA

DA DA DA DA DA DA DA DA DA DA DA DA DA

Import and marketing

• Regional governments guarantee development banks on fertilizers credit

• The development agents are responsible for collection of credits

• Availability of credit is mostly politicized especially during elections

Import and marketing

• Inaccessibility of farming areas and absence of sea port increased price and decreased use

• Possibility of increasing arable land discouraged fertilizer use

• In the past price of crops were controlled by the government which disfavor farmers

• Ineffective extension system that depend of propaganda than actual profitability

Policy objectives failures

• The number of people with chronic food shortage has increased to more than 5 million

• There are no private companies in any form • No significant progress in establishing fertilizer

factory

Comparison Variables India Ethiopia

Occurrences of famine Six , (since 1880s to 1943)

Three (1890s, 1974 and 1984)

Population >1 billion 80 million

Average cereal yield 2.5 t/ha 1.6 t/ha

Fertilizer use (2005) 129kg/ha 10kg/ha

Total fertility rate (2005) 2.6 5.3

Fertilizer production More that 60 No

Ethnic politics (north-south divide) Implicit Explicitly since 1991

Cereal yield growth

19611965

19691973

19771981

19851989

19931997

20012005

0

1000

2000

3000

IndiaEthiopia

Cere

al y

ield

(tha

)

Fertilizer consumption

-1000000

2000000

5000000

8000000

11000000

14000000

17000000

20000000

0

50000

100000

150000

200000

India

Ethiopia

Tot

al f

erti

lize

r (m

ill t

, In

dia

)

Tot

al f

erti

lize

r (1

00 t

hou

san

d t

, E

thio

pia

)

Arable land

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

0

5

10

Ethiopia

India

Ara

ble

lan

d (

per

son

/ha)

Similarities Differences High rate of poverty (44% Eth, 26% Ind) Dynamic fertilizer sector policy Dependence on central planning in Agri Major role of private sector High rate of initial population growth Well developed fertilizer industries North south divide 30 times higher road network Central planning is prevalent Lower per capita external aid Comparably high GINI coefficient Agriculture contribution to GDP is lesser Favored high potential areas Superior irrigation system and available

water (TRWR= 40 times bigger)

Conclusion • India has room for improvement in fertilizer

production and use– Policy change is obstructed by interest groups

• Need institutional stability

• Ethiopia has the potential to initiate production of nitrogen fertilizer and increase use– Encouraging private companies involvement– Better market environment – Efficient use of extension agents

Next plan

• Prospect of fertilizer supply in India • Policy changes required in fertilizer sector • Potential of establishing Ethiopian fertilizer

industry

Cereal yield

19611967

19731979

19851991

19972003

0

10000

20000

30000

40000

Barley

Maize

Millet

Rice, paddy

Sorghum

Wheat

Yiel

d (t

/ha)

Harvested area

19611970

19791988

19972006

05000000

100000001500000020000000250000003000000035000000400000004500000050000000

Barley

Maize

Millet

Rice, paddy

Sorghum

WheatHar

vest

ed a

rea

(mill

ion

ha)

Cereal yield

19611967

19731979

19851991

19972003

0

10000

20000

30000

40000

Barley

Maize

Millet

Rice, paddy

Sorghum

Wheat

Yiel

d (t

/ha)