Cleaning up fertiliser imports

The fertiliser given by the Government is one of the most crucial subsidies provided by the State. It supports the agriculture sector, which employs about 27% of Sri Lanka’s labour force even though economic contribution is only about 7%. So powerful is this segment of society that they often make up key vote bases and it is estimated that as much as 70% of Sri Lanka’s population is indirectly connected to agriculture. 

It is therefore predictable that successive governments have sought to keep the fertiliser subsidy. The previous administration’s attempt to tinker with the program had rather disastrous electoral consequences in 2018. The current Government has long enjoyed much partisanship from this base and has targeted many of its critical policies at the agriculture sector, seeing it as a critical component of countering COVID-19 and fostering sustainable growth. 

However, a recent report from the Auditor General indicates that the implementation of the subsidy, which runs to billions of rupees each year, leaves much to be desired. An earlier report in February 2020 has also indicated that large quantities of low quality fertiliser had found their way into the soil increasing harmful cadmium and lead deposits while also wasting large amounts of public funds. The structure of the fertiliser subsidy has also resulted in local phosphate deposits not being utilised for decades despite being more useful for local agri production.

The earlier Auditor General’s report showed that Rs. 2.8 billion was spent importing harmful fertiliser in 2018 and repeated attempts to begin local production, which would have provided less harmful and potentially cheaper fertiliser to farmers, had failed. There have also been multiple instances of fertiliser imports not arriving on time and farmers struggling to get adequate access. These bottlenecks have hampered production and undermined the industry. 

According to the latest Auditor General report the National Fertiliser Secretariat (NFS) has overpaid billions of rupees to companies importing fertiliser as part of the Government subsidy program while officials there have engaged in forging laboratory test reports to release substandard stocks.

The fertiliser subsidy came into effect from 6 April 2018 following a Cabinet decision, but a special audit inspection on irregularities occurred in the implementation of the national fertiliser subsidy program found that both the State and farmers were cheated  in the process of its implementation.

The Auditor General said that a sum of over Rs. 4 billion (Rs. 4,084,682,282) had been paid for 156,275.5 metric tons of four types of fertiliser to 11 importing companies without proper verification of stocks or quality checks. The report said officials had acted irresponsibly by paying different prices offered by the companies that imported the fertiliser without taking action to pay a common price for each type of fertiliser using a price formula prepared on the recommendation of a Pricing Committee. Companies that imported stocks before the subsidy came into effect were paid Rs. 900 million. 

The revelations underscore the need to rethink and revamp the entire fertiliser production and distribution system in the country as well as hold companies and officials responsible. The Government over the last few months have passed multiple Cabinet papers to implement local production of fertiliser and improve distribution channels. But a holistic approach including stakeholders will have to be speedily implemented to reduce further mismanagement and wastage.