Benefits Farmers, taxpayers, and consumers benefit from public investment that enables private sector fertilizer markets to emerge (box 7.19). Specific benefits include: Private fertilizer distribution replaces inefficient parastatals and subsidies, which are often a substantial burden on public expenditures.
Private fertilizer distribution results in lower prices to farmers, more timely supply, greater variety in fertilizer formulations to meet local requirements, and production diversification (box 7.20).
Improved availability of fertilizer and other inputs contributes to supply chain integration and increased agricultural productivity.
Box 7.19 Bangladesh: withdrawal of subsidies During 1988–94, the Government of Bangladesh saved about US$119 million by withdrawing fertilizer subsidies. The 800-member Bangladesh Fertilizer Association was created, and the fertilizer retail network employed 170,000 people. Fertilizer sales increased at an annual rate of 8 percent, and government fertilizer imports declined from 100 percent to nil. The government instituted monthly fertilizer market monitoring to improve the industry information base. Source: IFDC 1994 |
 Box 7.20 Malawi: fertilizer for diversification Malawi’s heavy dependence on tobacco for export earnings has been a cause for concern. To make other export crops and food crops more profitable, the government is promoting increased fertilizer use. This strategy relies on applications of diammonium phosphate and urea topdressing for the maize crop, which is followed by groundnuts or pulses, both of which have good export potential. The use of residual phosphate and atmospheric nitrogen fixation by the groundnut or pulse crops reduces the cost of providing crop nutrients. Training for fertilizer dealers and fertilizer demonstrations for farmers have been key to the program’s success. Source: Bumb 2002 |
Policy and Implementation Issues
Parastatal competition. Public sector enterprises and subsidized fertilizer distribution discourage the development of competitive private agribusiness. Protection of inefficient domestic producers and traders typically reduces the range of products available and increases fertilizer prices. An enabling environment for agribusiness development is critical. Structured dissolution of state enterprises—with incentives for the private sector to fill the void—is essential to market development (box 7.21).
    
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