Demand for Nitrogenous Fertilizers and Fertilizer Price Policy in Pakistan

One of the major constraints to an increase in Pakistan’s agricultural production is low fertilizer input. Despite spectacular growth of fertilizer consumption during the ’60s the rate of fertilizer application in Pakistan remains below the optimal rate [8, pp.77-90] and far below the rates in advanced countries [15, p. 24]. An upward movement of the rate of fertilizer application, essential to avoid recurring loss of agricultural production, entails appropriate policy measures over a long time-horizon. Appropriate policy guidance may well be derived from the experience of the ’60s. It is believed that low fertilizer prices, among other factors, contributed enormously to the growth in fertilizer consumption [9, pp.419-25]. Towards the end of the ’60s, however, the fertilizer prices increased causing a decline of per acre and total fertilizer consumption [15, p. 24]. As fertilizer is a critical input, reduced consumption is translated into reduced agricultural output, higher prices of agricultural commodities or both.