Petrotahlil - In a proposal put forward yesterday, the DAP subsidy would triple from 300 rupees ($1.86)/50kg bag to Rs925/bag ($115/t) and the rates on other fertilizers would also rise, local sources confirmed. The countrywide fertilizer subsidy allocated in the budget for the kharif season amounts to Rs37bn under the proposal, but the government is yet to approve it. Market participants expect that higher subsidy rates will drive demand for all fertilizers this season.

Currently, only the eastern province of Punjab subsidises fertilizers, but the federal government is planning to expand this to the whole country. Punjab uses a sticker system, whereby farmers can scan a code printed on a bag of fertilizer to claim the subsidy.

But it is not clear yet when the proposal will come into effect, and other provinces would first have to implement a system to be able to process the payments.

Most of Pakistan's fertilizer demand is concentrated in Punjab. In the first quarter of 2020, the province accounted for three quarters of Pakistan's domestic DAP offtake and around 70pc of urea demand, according to data from Pakistan's National Fertilizer Development Centre.

According to the proposal, forecast kharif fertilizer demand is 4.74mn t, of which 3.05mn t will be urea, 956,000t will be DAP and 330,000t will be CAN. A further 280,000t of NP 22-20 offtake are expected.

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