With the global price of chemical fertiliser soaring to a seven-year high, Nepali farmers could be in line for a repeat of the 2020 fiasco when they suffered a severe shortage of the vital plant nutrients at the height of the paddy growing season.

During the last monsoon, the heavens opened up and Nepal received 31 percent more rain than usual, helping cultivators to achieve a better-than-expected harvest despite running short of fertiliser.

Agro experts said Nepal had a chance to reap an even larger harvest because it had a bountiful supply of both rainfall and farm workers, but the government wasted the opportunity due to its weak fertiliser distribution mechanism.

With the price surging upward, there are fears that a chemical fertilizer shortage may recur this year. According to officials of Agriculture Inputs Company and Salt Trading Corporation, plant nutrients have become very expensive worldwide, but supplies in Nepal would not be affected as shipments are already on their way.

The two state-owned companies are the only suppliers of chemical fertilizers to Nepali farmers.

According to reports, prices of urea and diammonium phosphate (DAP), the world's most widely used fertilizers, jumped by a steep 21 percent in February compared to last month. The price increase partly reflected higher input costs, especially energy, as prices of several energy benchmarks have doubled since May last year.

DAP had an average price of $588 per tonne, up $102, while urea was at $453 per tonne, up $80. “It’s increasing each passing day. The price of DAP has reached $588 per tonne last week,” said Kumar Rajbhandari, spokesperson for Salt Trading Corporation.

“The increase in global prices means that planned imports of fertilizer will have to be reduced. We can only buy the quantity allowed by the budget allocated to us,” he said.

The government has allocated Rs11 billion in fertilizer subsidies for this fiscal year. The value of total imports hovers around Rs19 billion annually.

Salt Trading Corporation has been authorized to import 30 percent of the country's fertilizer requirement and Agriculture Inputs Company imports the rest.

This year, out of planned imports of 500,000 tonnes of chemical fertilizer, Salt Trading Corporation has been assigned to import 150,000 tonnes. “As per our quota, we have only 24,000 tonnes left to be imported. So the price volatility will not impact us much,” he said, adding that they had already issued a tender notice for the remaining quantity.

In the last fiscal year, Salt Trading Corporation was able to import only 125,000 tonnes of fertilizer out of the proposed import of 350,000 tonnes due to lack of funds.

Bishnu Prasad Pokharel, spokesperson for Agriculture Inputs Company, told the Post that the price volatility would not affect them this fiscal year ending mid-July, but if the global trend continues, it would significantly affect them. “More than 60 percent of the fertilisers on order have arrived,” he said.

Last year, farmers encountered fertiliser shortages right from the beginning of the planting season in June. First, there was a short supply of DAP, as the Covid-19 pandemic disrupted the global production and supply chain.

Then a shortage of urea appeared during the first and second top dressing. In response, the then minister for agriculture Ghanashyam Bhusal promised to bring urea from Bangladesh and requested a shipment of 50,000 tonnes.

In many districts last year, farmers were forced to buy urea smuggled in from India by paying a black market price of Rs50 per kg following a nationwide shortage, according to ministry officials. The fertiliser costs Rs14 per kg at the government subsidised rate.

According to Pokharel, the request to Bangladesh has materialized, and the shipment will come this year under a government-to-government deal.

“Of the total quantity, 22,500 tonnes of chemical fertilizer left Bangladesh for Kolkata port in India on Sunday,” he said. “The next consignment of 7,500 tonnes will be dispatched next week. And the rest will arrive by March.”

“So, based on the current consignments and stocks, we don’t think a fertilizer shortage will reappear this year,” said Pokharel. “But for the next fiscal year, if the price remains on the higher side, the allocated budget will not be sufficient to meet demand.”

Despite the optimistic claim, some officials at the Agriculture Ministry said that Agriculture Inputs Company was still struggling to import fertilizer as its two tenders have been dropped by bidders due to wide price fluctuations. “Agriculture Inputs Company still has to procure 30-40 percent of its assigned quantity.”

According to the Agriculture Ministry, the annual demand for chemical fertiliser currently stands at more than 700,000 tonnes while imports are just around 300,000 tonnes. Subsidised fertiliser fulfils 40 percent of the country’s total requirement while the rest is met by informal imports or shipments smuggled across the open border.