New law surfaces to sustain fertiliser import monopoly
August 22, 2017 - News
The new directive will enable the Ministry to procure fertilisers directly from the manufacturers for three years
The Ministry of Agriculture & Natural Resources (MoANR) has finalised a draft directive that will gear up the monopoly of the fertiliser import process. The new directive will also let the Ministry procure fertilisers directly from manufacturers for three years at a fixed price.
The main aim of drafting the directive is to shorten the period spent to import and distribute fertilisers and to resist the drastic price surge of the former, according to Seifu Assefa, director of Agriculture Input Marketing at the Ministry.
“When the fertilisers are procured from importers it takes over a year to reach the hands of the farmers, but when it is directly from manufacturers, the time will be cut by half,” said Seifu.
It took a year for the Ministry to draft the regulation. Three weeks ago, the Ministry put the directive up for discussion to stakeholders of fertiliser import and distribution. The Ministry of Transport, the Ethiopian Agricultural Business Corporation, the Maritime Affairs Authority, and regional state agricultural bureaus were the stakeholders consulted in the process and gave comments on the directive.
“Comment from the stakeholders was already collected, and we just finalised the draft incorporating the comments,” said Seifu.
The amount of fertiliser imported into the country is increasing year to year. A decade ago, the country imported 200,000tn of fertiliser, but this amount reached 1.2 million tonnes during the just-ended fiscal year.
In the recent procedure, the Ministry announces a tender through the Agricultural Business Corporation (ABC) inviting companies to supply the product to the Corporation. The tender is announced in different lots and rounds. The then Agricultural Inputs Supply Corporation (AISCO) has been exclusively procuring fertilisers delegated by the Ministry since 2008.
“We experience significant price fluctuation throughout a year between the time intervals of consecutive tenders,” said Seifu.
The new procurement process will also reduce the administrative cost to announce and process the tenders, according to him.
For the new fiscal year, to procure 1.5 million tonnes of fertiliser, the Ministry needs 18 billion Br; about 600 million dollars of it will be in foreign currency and five billion Birr will be in local currency.
Currently, the country imports seven types of fertilisers, mainly Urea and NPS. For the current fiscal year, the Ministry targets to collect 345 million tonnes of crop yield.
In addition to the directive, recently the Ministry finalised an amendment of two legal frameworks named the Fertilizer Policy and the Fertilizer Production & Trade Proclamation, which were issued in 1993 and 1998, respectively, and will facilitate the monopoly of procurement and distribution of fertilisers.
According to the new draft legal frameworks, the monopoly will continue through the delegation of ABC.
“But in the meantime, we might delegate another institution for the procurement of the fertilisers, or the Corporation may continue as a delegate,” said Seifu.
This is an unwise move for Franklin Simtowe (PhD), a fertiliser expert who assessed the National Fertilizer Policies, Regulations & Standards of Ethiopia.
The centralised procurement system has proved useful concerning ensuring the allocation of foreign exchange and timely fertiliser procurement, but there is a lack of competition within the fertiliser supply chain, according to Simtowe.
“Gradually, it is necessary to liberalise the fertiliser industry to raise the private sector’s participation in the procurement and distribution process,” said Simtowe.
With a probability of being the last procurement under the previous directive, the government recently announced a tender for the procurement of fertilisers. The tender is aimed to procure 1.3 million tonnes of four types of fertilisers, namely Granular Urea, NPSB, NPS, and NPSZnB.
The government plans to gradually minimise and finally wholly substitute fertiliser import while the ongoing fertiliser plants are finalised.
Currently, the Metal & Engineering Corporation (MetEC) has been contracted to construct Yayu Fertilizer Company. In addition to Yayu, five fertiliser-blending factories are under construction in Oromia, Southern Nations, Nationalities & Peoples’ (SNNP), Amhara and Tigray regional states.
Morocco’s Office Cherifien des Phosphates (OCP), last year’s supplier of fertiliser to the country, has signed a deal with the government of Ethiopia to build a 3.7 billion-dollar fertiliser plant in Dire Dawa. The under-construction plant is expected to be partially operational in two years and fully operational by 2023.
The draft directive is expected to be tabled to the Minister and State Minister for approval within a month’s time, according to Seifu.
Upon approval of the directive, the Corporation will approach international manufacturers to take part in the process, inviting them to submit their prices and technical specifications.
After reviewing the documents, the Corporation will award the technically eligible and lowest bidder company. And transportation of the consignments will be held throughout the year without any interruption, according to the draft directive.
“This will be very advantageous for the farmers in various regions who cultivate crops in different seasons,” said Seifu.
Although smallholder farming dominates Ethiopia’s agricultural sector, the farmers are highly dependent on rainfall that leads to low productivity. Also, the farmers are less active to use and adopt enhanced technologies such as improved seed varieties and fertilisers, resulting in low agricultural productivity while the country harvests vast areas of farms.
The tender for the procurement of the first round consignment will be opened on August 30, 2017.
Source: Addis Fortune