ANALYSIS OF

FERTILIZER
INDUTRY OF
PAKISTAN

PHOENIX
PAF KARACHI INSITITUTE OF ECNOMICS AND
TECHNOLOGY, KARACHI PAKISTAN

Submitted by:

MARYAM NISAR (BB-3-06-3416)

SIDRA JAMAL (BB-3-06-3428)

Course:

ANALYSIS OF PAKISTANI INDUSTRY

Submitted to:

Mr. QAZI SALMAN

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PHOENIX
Table of Contents
PRODUCTS: ........................................................................................................................................6
Brands: ..............................................................................................................................................7
SIZE OF INDUSTRY...............................................................................................................................8
GEOGRAPHICAL LOCATION..................................................................................................................9
FACTORIES LOCATION ...............................................................................................................9
WAREHOUSES ..........................................................................................................................9
TOTAL PRODUCTION.........................................................................................................................10
TOTAL EMPLOYMENT .......................................................................................................................10
TOTAL EXPORT .................................................................................................................................10
NUMBER OF NEW PLANTS AND NUMBER OF PLANTS CLOSED DOWN..................................................10
TOTAL IMPORTS ...............................................................................................................................11
FIRST YEAR AFTER THE FORMATION OF INDUSTRY .............................................................................12
STATSUS OF THE INDUSTRY IN 1971 (EAST PAKISTAN SEPARATION) ....................................................12
IMPACT OF NATIONALIZATION ..........................................................................................................12
CHRONOLOGICAL HISTORY OF THE FERTILIZER SECTOR IN PAKISTAN ...................................................13
Fauji Fertilizer Company .....................................................................................16
Introduction: ..........................................................................................................................16
Engro Chemicals Pakistan LTD ...........................................................................................................19
Introduction ...........................................................................................................................19
Dawood Hercules Chemicals Limited..................................................................................................22
CRITERIA FOR SELETING THESE COMPANIES AS MAJOR PLAYERS .........................................................25
IMPACT ON THE INDUSTRY ...............................................................................................................25
TRADE ASSOCIATION ........................................................................................................................25
REGULATIONS OF OTHER INTERNATIONAL TREATIES ..........................................................................26
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PAKISTANI INDUSTRY ........................................................................................................................27

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OTHER COUNTRIES ..................................................................................Error! Bookmark not defined.

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ECOMONIC IMPACT OF WTO.............................................................................................................28
IMPACT ON PAKISTANI ECOMOMY ....................................................................................................28
ECOMONIC IMPACT OF WTO IN OTHER COUNTRIES ...........................................................................29
DIFFERENCE OF IMPACT....................................................................................................................29
INCENTIVES OFFERED .......................................................................................................................30
INCENTIVES OFFERED IN PAST ...........................................................................................................30
INCENTIVES THAT INDUSTRY ASKING FOR ..........................................................................................30
BENEFITS BY THE INDUSTRY ..............................................................................................................31
INCENTIVES OFFERED TO THE OTHER COUNTRIES...............................................................................31
PRODUCTION PROCESS OF FERTILIZERS .......................................................................................32
UREA MANUFACTURING PROCESS ...........................................................................................32
SINGLE SUPER PHOSPHATE MANUFACTURING PROCESS ...........................................................34
DETERMINANTS OF FIXED COSTS.......................................................................................................35
DETERMINANTS OF VARIABLE COSTS .................................................................................................35
PRICE LIST OF PRODUSTS ..................................................................................................................35
Engro Chemicals Company Ltd:................................................................................................35
Fauji Fertilizer Company Ltd. ...................................................................................................36
Dawood Hercules Company Ltd.: .............................................................................................36
Fatima Fertilizer Company Ltd.: .........................................................................................................36
PRICING MODEL ...............................................................................................................................37
ECONOMIC IMPACT ON THE INDUSTRY..............................................................................................38
HUMAN RESOURCE ISSUES IN INDUSTRY ...........................................................................................38
HURDLES IN MARKETING: .................................................................................................................38
FINANCING EASILY AVAILABLE...........................................................................................................39
IMPACT OF POLITICAL PARTIES ..........................................................................................................39
TRADE ISSUES RELATED TO FERTILIZER INDUSTRY...............................................................................39
PROPOSALS GIVEN BY PEOPLE OF FERTILIZER INDUSTRY .....................................................................40
OUR PROPOSALS ..............................................................................................................................41
HUMAN RESOURCE REQUIREMENTS OF FERTILIZER INDUSTRY............................................................41
SORT OF PEOPLE NEEDED..................................................................................................................42
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SPECIFIC TRAINING INSTITUTIONS .....................................................................................................43

Supplier Power .................................................................................................................................44

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Buyers Power ...................................................................................................................................45
Potential Entrants.............................................................................................................................45
Substitutes.......................................................................................................................................46
Rivalry..............................................................................................................................................46
MARKET ...........................................................................................................................................46
TREND ANALYSIS ..............................................................................................................................47
Political Trend:........................................................................................................................47
Economical Trend: ..................................................................................................................47
Social Trends: .........................................................................................................................48
Technological Trend:...............................................................................................................48
Legal Trend: ..........................................................................................................................48
Environmental Trend: ...........................................................................................................49
Demographical Trend:...........................................................................................................50
PORTER’S FIVE FORCES MODEL .....................................................................................................50
Supplier Power .......................................................................................................................50
Buyers Power .........................................................................................................................50
Potential Entrants...................................................................................................................51
Substitutes .............................................................................................................................51
Rivalry....................................................................................................................................52
SWOT ANALYSIS .............................................................................................................................52
Strengths:...............................................................................................................................52
Weakness:..............................................................................................................................52
Opportunities: ........................................................................................................................53
Threats:..................................................................................................................................53
SWOT –I MATRIX ............................................................................................................................54
SWOT –i matrix.................................................................................................................................55
STRATGIC PLAN ................................................................................................................................56
Bibliography.....................................................................................................................................57
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PRODUCTS
1. Urea,
2. Di-Ammonium Phosphate (DAP
3. Calcium Ammonium Nitrate (CAN)
4. Ammonium Sulphate (AS)
5. Single Super Phosphate (SSP)
6. Nitro phosphate (NP)
7. Sulphate of Potash
8. Zinc Sulphate

1. Urea:
More than 90% of the world’s production is destined for use as a nitrogen-release
fertilizer. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in
common use (46.7%).

2. Di-Ammonium Phosphate (DAP):

It contains 46% P2O5 and 18% N. it is water soluble. It is a good source of P fertilizer
for all crops. Good source for problem soils. Overall, it suits to about 90% soil of the
country.

3. Calcium Ammonium Nitrate (CAN):

Calcium ammonium nitrate (CAN) contains 27 % N and 20 % of ground limestone. This
has a rapid as well as permanent effect. The granulation of this fertilizer ensures a quick
and exact dosing.

4. Ammonium Sulphate (AS)

(NH4)2 SO4, is an inorganic salt. It is used largely as an artificial fertilizer for alkaline
soils. It lowers the pH balance of the soil, while contributing essential nitrogen for plant
growth.

5. Single Super Phosphate:

Superphosphate is a fertilizer produced by the action of concentrated sulfuric acid on
powdered phosphate rock.

6. Nitro phosphate (NP)

It provides 22% nitrogen, and 20% phosphorus. Nitrogen is a primary nutrient
that really makes plants "grow”. Phosphorus is a primary nutrient that encourages
rooting, blooming and fruit production in plants.

7. Sulphate of Potash:
Potassium sulphate (K2SO4)) is a non-flammable white crystalline salt which is
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soluble in water. This chemical is commonly used in fertilizers, providing both

potassium and sulphur.

PHOENIX
BRANDS
1. Engro Chemical Company Ltd
2. Fauji Fertilizer Company Ltd.
3. Dawood Hercules
4. Fatima Fertilizer Company Ltd.
5. National Fertilizer Corparation

1. FERTILIZER BY ENGRO CHEMICAL PAKISTAN LTD.

Nitrogenous Fertilizers:

 Engro UREA is a trusted, high-grade fertilizer which is suitable for all crops on all
types of soils. Engro Urea is an excellent source of Nitrogen for the vast majority of
cultivated soils of Pakistan.

Phosphatic Fertilizers

 Engro DAP: contains 46% P2O5 and 18% N. It is a good source of P fertilizer for all
crops. It is an equally good source on problem soils. On an overall basis it suits to
about 90% soils of the country.

 Engro Zorawar: is one of the highest grade phosphatic fertilizers. It is acidic in

reaction more than 90% is water soluble. It is a beneficial fertilizer for all crops on
all soils of Pakistan and produces excellent results on alkaline soils, due to its acidic

 Engro Phosphate: is brown colored mono ammonium phosphate with 11%

nitrogen and 52% phosphorus. It is being marketed as relatively cheaper alternate
of DAP.

Blended Fertilizers

 Engro Zarkhez: is homogenously granulated fertilizer which maximizes crop yield

by providing balanced nutrition for a wide variety of crops through the uniform
availability of Nitrogen, Phosphorous and Potassium. Fertilizers have low moisture
content, high crush strength; 2mm-4mm granule size and free flowing nature -
attributes which ensure excellent handling and application characteristics.

 Engro NP: It provides 22% nitrogen, and 20% phosphorus. ECPL entered into NP
business in 2005 to Primary focus area for ENP marketing is South Zone (Sind).

Micro Nutrients:
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 Zingro: Zinc Sulphate, a highly effective, primarily targets Zinc deficiency in crops
like Rice, Potato, Maize, Sugar cane, Wheat, Cotton, vegetables and fruits. Zingro

PHOENIX
 increases crop yield and enhances crop appearance.

2. FUJI FERTILIZER COMPANY LTD.

 Sone Urea: most widely used fertilizer in the country. Fertilizer is white in color,
free flowing, readily soluble in water and both contain 46% Nitrogen. Because of its
high solubility, it is suitable for solution fetilizers.

 Sona DAP: is the most concentrated phosphatic fertilizer containing 46% P 2O5 and
18% Nitrogen. It is the widely used phosphatic fertilizer in the world as well as
Pakistan. The solubility of DAP is more than 95%. Its nitrogen to phosphoris ratio (
1 : 2.5 ) makes it an ideal fertilizer, to meet the initial requirement of most of the
crops.

 Sona SOP: This fertilizer is an important source of Potash, which is a quality

nutrient for production of crops especially fruits and vegetables. Potash improves
the resistance of the plants against pests, diseases and stresses like water .

3. Dawood Hercules Chemicals Limited.

 Bubber Sher: The Company's principal activity is to produce urea fertilizer.
The Company markets its urea under the brand name Bubber Sher.

4. Fatima Fertilizer Company Limited:

 Nitro Phosphate
 Nitrogen Phosphorous Potassium
 Calcium Ammonium Nitrate
 Urea

5. National Fertilizer Corporation:

 Calcium Ammonium Nitrate
 Nitro Phosphate
 Single Super Phosphate
 Zinc Sulphate

SIZE OF INDUSTRY
Number of Compaines 6
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Number of Factories/Plants 14

PHOENIX
 Tones in “000” 2007-8(July-March) 2006-7 2005-6

FERTILIZER 1846.9 2735.2 2826

PRODUCTION

GEOGRAPHICAL LOCATION
FACTORIES LOCATION

CITIES NUMBER OF FACTORIES

Bin Qasim 2
Sheikhupura 1
Sadiqabad, Rahim Yar Khan 2
Multan 1
Haripur 2
Faisalabad 1
Mirpur Mathelo, Dist Gotki 1
Daudkhel 1

WAREHOUSES
Mian Chunnu
Faisalabad
Khanewal
D.G. Khan
Dera Ismail Khan
Sukuar
Lahore
Karachi
Larkana
Dadu
Thatta
Mirpur khs
Nawabsha
Multan
Sheikupura
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PHOENIX
TOTAL PRODUCTION
(IN THOUSAND TONS)
YEAR UREA SUPER AMMOMIUM NITRO AMMON I
PHOSPHATE NITRATE PHOSPHATE UM SULPHATE
1998-1999 3521.7 21.6 338.8 265.0 -
1999-2000 3785.0 145.8 386.5 261.3 -
2000-2001 4005.1 159.6 374.4 282.5 -
2001-2002 4259.6 161.0 329.4 305.7 -
2002-2003 4401.9 147.2 335.3 304.9 -
2003-2004 4431.6 167.7 350.4 363.5 -
2004-2005 4606.4 163.1 329.9 338.9 -
2005-2006 4806.4 16.8 327.9 356.6 -
2006-2007 472.5 148.9 330.8 325.8 -
2007-2008 4924.9 157.6 343.7 329.7 -
2007-2008 3660.5 114.8 246.0 218.4 -
(JULY-MARCH)
2008-2009 3652.4 143.2 245.7 218.4 -
(JULY-MARCH)
Source: NFDC

TOTAL EMPLOYMENT
o Direct employment:
 31,000 people are directly employed in fertilizer sector.
 4139 people /day
o Indirectly employment:
Agriculture is the mainstay of Pakistan’s economy. It accounts for 24 percent
of the GDP and employs 48.4 percent of the total labor force.

TOTAL EXPORT
46 thousand tones of urea were exported in 2002/03.

NUMBER OF NEW PLANTS AND NUMBER OF

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PLANTS CLOSED DOWN

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Number of new plants opened 1

Number of plants closed down 1

PHOENIX
TOTAL IMPORTS

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FIRST YEAR AFTER THE FORMATION OF
INDUSTRY

1971 Separation of East Pakistan

STATSUS OF THE INDUSTRY IN 1971 (EAST

PAKISTAN SEPARATION)
The separation of East Pakistan was a huge disaster for the country. But it did not have
so much adverse effects on the fertilizer industry. The reasons for not been affected was:
The industry was not big at that particular time
It had all its setup in the West Pakistan.
But whatever the problem was, it was facing the financial crunch because, 80% of the
wealth was in East Pakistan. This was one of the reasons that this industry could not grow.
The other reason was low demand because the fertilizer which was being used mainly to
fulfill needs was “Organic Fertilizer.”
At that time, there was three main companies in this industry namely, Dawood
Hercules (formed in 1968), national Gas & Fertilizer (1962) and Esson (current Engro,
formed in 1965). Among them, Dawood Hercules faced some losses but in different
industry products such as nationalization of their Dawood Petroleum Ltd.

IMPACT OF NATIONALIZATION
Although this industry was present at the time of nationalization, but this industry did
not get nationalized because companies at that time neither were more in numbers, not big.
Therefore, the nationalization process which started from 1972, could not have impact on
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this particular industry.

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CHRONOLOGICAL HISTORY OF THE
FERTILIZER SECTOR IN PAKISTAN
1952 Nitrogenous fertilizers were introduced in Pakistan.
1957 Lyallpur Chemicals and Fertilizers Limited (LCFL) is set up
and designed to produce Single Super Phosphate (SSP).
1958 Pak American Fertilizer Limited (PAFL) is commissioned and
designed to produce ammonium sulphate.
1959/60 phosphorus introduced in Pakistan
1962 National Gas Fertilizer Factory is set up producing Urea,
Ammonium Nitrate, and Nitric Acid.
1965 Esso Pakistan Fertilizer Company Limited (EPFC) is
incorporated and designed to produce urea 1968 Designed
Capacity of PAFL is increased.
1966/67 Potassium introduced in Pakistan.
1973 National Fertilizer Development Corporation (NFDC) is
established with an authorized share capital of 1000m. It's
mandate is to manage the existing fertilizer factories and to
establish additional factories.
1976 Capacity of LCFL is doubled.
1978 NGFF is renamed Pak Arab Fertilizers after 48% stake is
acquired by Government of Abu Dhabi.
1980 Pak Saudi Fertilizer Company is established designed to
produce urea.
1982 Pak China Fertilizers Limited (PCFL) goes into commercial
production. It is designed to produce urea.
1982 Fauji Fertilizer is established.
1985 Hazara Phosphate Fertilizer Limited is incorporated and is
designed to produce Granulated Single Super Phosphate
Fertilizer.
1986 Government deregulates prices of nitrogenous fertilizers
1989 Fertilizer Policy is announced providing incentives for fresh
investment in the sector.
1990
1991 Esso (Exxon) announces its intentions to sell 75% of its
holdings in EPFC. Engro Chemicals Pakistan Limited is formed.
1992 FFC was listed on Islamabad Stock Exchange.
1993 FFC once again came forward and put up another urea
manufacturing facility at Goth Machhi to meet the growing
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demand. The new plant commenced commercial production

1994 FFC has been ranked 5th Best Company of the Karachi Stock
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Exchange(KSE).
1995

PHOENIX
1996 FFC-Jordan fertilizer company was formally listed with stock
exchange in MAY.
1997 International Finance Corporation (ifc) Washington D.S signed
an agreement to provide $ 18 million in loan to ENGRO
fertilizer Pakistan ltd.
1998 FFC Jordan is established. It is the first company to locally
manufacture Di ammonium phosphate (DAP) in the country.
1998 Engro in large part to investments made in the renovation of
its plants in 1998, which increased production by 14%.
1998 FADINAP provided financial assistance to the National
Fertilizer Development Centre (NFDC), Islamabad, Pakistan to
study the impact of privatization and deregulation on
fertilizer sector development in Pakistan.
1999 Manfred Jeebe, former Team Leader returned as consultant to
FADINAP from 15 February to 30 April 1999, for a period of
eleven weeks, to conduct desk-research and undertake
missions to study the fertilizer marketing systems and related
government policy in Pakistan and Nepal.
1999
1999 Upon the request of the Fertilizer Unit, Ministry of Agriculture,
Nepal, FADINAP Web site in-charge, Mr. Edgar Dante, and
Research Assistant, Mr. Naripone Sivanunwong conducted a
follow-up training in Kathmandu on the development of their
national Web site from 18 to 22 July 1999.
2000 FFC commercial production commenced wef Jan 2000
2000
2000
2001 FJFC DAP Plant brought to suspension due to accumulated
loss of Rs. 6.5 Billion.
2001 Ministry of Industries and Production announced Fertilizer
Policy 2001.
2001 Pak Saudi Fertilizer was purchased by FFC for a purchase
price of PkR7.3bn rupees.
2002 A substantial decline in sales of Dawood Hercules ltd seen in
first half of the year.
2002 FFC acquired Pak Saudi Fertilizer Ltd Urea Plant situated at
Maripur.
2002 46 thousand tones of urea were exported.
2003 FFC DAP Plant resumed production in Sep.
2003 FFC obtained the certification of occupational health and
safety assessment series, OHSAS-18001:1999
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2003 Fatima Group and Arif Habib Group, incorporated in Dec 24

2004 The Economic Coordination Committee decided to maintain
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the ban on export of urea.

2004 Pak Arab unit is in an advanced stage of privatization.

PHOENIX
2004 Dawood Hercules has the privilege of being the first fertilizer
manufacturing company to obtain ISO-9001:2000 certification
in Pakistan.
2005 July 14, Pak Arab Fertilizer was privatized at a cost of
Rs14.125 billion under privatization policy of Government of
Pakistan.
2005 Dawood Hercules Chemicals Limited (DHCL) and Sui Northern
Gas Pipelines Limited (SNGPL) signed Gas Sale/Purchase
Agreement revalidated for a period of next 4 years on, Sept 07
2005 Dawood Hercules Chemicals Limited has been listed amongst
the 25 companies for the Karachi Stock Exchange (KSE) Top
Companies Award for 2005.
2006 FFBL is its accreditation of ISO certification, which was
achieved in Mar 2006 for both the Head Office and Plant site.
2006 Engro announces Rs. 2.55 billion profit for Financial Year 06 .
2006 Engro Chemical wins prestigious Asian CSR Award.
2007 Engro Chemical listed among top 5 Notable COPs in Chemical
Sector by United Nations Global Compact.
2007 FFBL successfully completed Ammonia Plant.
2007 Engro signed agreement with Descon Engineering Ltd for new
Ammonia and Urea Complex.
2008 The industry provided a subsidy of Rs 100 billion to farmers
for the nine months ended September 30.
2008 PIDC, Engro Chemicals to set up training center in Dharki .
2008 PIDC approves Rs 100m for technical training center.
2009 Engro reinforces commitment for improved HSE Management
2009 Recent award of electromechanical works for the revamp of
Pak American Fertilizer Limited, Sikandarabad is yet another
significant accomplishment by Descon.
2009 Kissan Support Service Limited (KSSL) has signed a
Memorandum of Understanding MoU with Pak Arab Fertilizer
to ensure timely availability of fertilisers, seeds, pesticides and
other agriculture inputs to the farmers.

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Fauji Fertilizer Company

Introduction:
FFC was incorporated in 1978 as a PVT. Basically this was the joint venture between Fauji
foundation and Haldor Topsoe of Denmark.

The initial capital of the company was 813.9 Million Rupees. The present share capital of
the company stands at Rs. 3.0 Billion. FFC has Rs. 1.0 Billion stakes in the subsidiary Fauji
Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited).

Location of Office:
Rawalpindi
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Regional Offices:
Multan

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 Lahore
Sukkar
Mirpur khas
Nawabshah

Plant Location:
There are 3 plants of FFC in Pakistan
2 plants are located in Goth Machhi
1 plant in Mirpur Mathelo

Product Offered:

Sona Urea
Sona DAP

 Sone Urea: most widely used fertilizer in the country. Fertilizer is white in color, free
flowing, readily soluble in water and both contain 46% Nitrogen. Because of its high
solubility, it is suitable for solution fetilizers.

 Sona DAP: is the most concentrated phosphatic fertilizer containing 46% P 2O5 and 18%
Nitrogen. It is the widely used phosphatic fertilizer in the world as well as Pakistan. it an
ideal fertilizer, to meet the initial requirement of most of the crops.

 Sona SOP: This fertilizer is an important source of Potash, which is a quality nutrient for
production of crops especially fruits and vegetables. Potash improves the resistance of the
plants against pests, diseases and stresses like water. 17
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Engro Chemicals Pakistan LTD

Introduction :3

Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in
Pakistan. The company was incorporated in 1965 and was formerly Exxon Chemical
Pakistan Limited until 1991, when Exxon decided to divest their fertilizer business on a
global basis and sold off its equity of 75% shares in our company.

The Employees of Engro, in partnership with leading international and local financial
institutions bought out Exxon’s equity and the company was renamed as Engro Chemical
Pakistan Limited. Engro is a public limited company listed on the Stock Exchanges of
Karachi, Lahore and Islamabad.

Location of Head Office:

19

Clifton Karachi
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Regional Offices:4
 Hyderabad
 Quetta
 Nawabshah
 Rahim Yar Khan
 D G Khan
 Multan
 Lahore
 Gurjanwala
 D I Khan

Products Offered

 Engro urea
 Engro Zorawar
 Engro Phosphate
 Engro NP
 Zingro
 Engro DAP
 Engro Zarkhez

Factories:
Dharki, Sindh.
Bin Qasim, Karachi

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Dawood Hercules Chemicals Limited.

Introduction:7
Dawood Hercules Chemicals Limited was incorporat ed as a public limited co mpany on 17 th April 1968, as a joint v enture
between Dawood Group of Industries and Hercules Inc. USA. It was the first private sector
venture in Pakistan to receive a loan from the World Bank and was the largest
ammonia/urea plant in country at that time.

Initially the plant's capacity was 345,000 metric tons of urea per annum. The plant was
revamped in 1989 / 1991 to enhance the capacity to 445,500 metric tons of urea p er
annum. Also, it made the manufacturing facilities more energy efficient and environment
friendly.

Dawood Hercules has the privilege of becoming the first fertilizer manufacturing company to obtain
ISO-9000:2000 certification. Dawood Hercules also won numerous safety and excellence awards.
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HeadOffice Location:8
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 Empress Road, Lahore
Factory Loaction:

Chichoki Mallia, Shkhupura

Product Offered:
 9Bubber Sher: The Company's principal activity is to produce urea fertilizer. The
Company markets its urea under the brand name Bubber Sher.

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CRITERIA FOR SELETING THESE COMPANIES AS
MAJOR PLAYERS

As the graph shows the market share of all the players of the industry, it is clearly
shown that major players of the industry are ENGRO and FFC. And this is the reason for
selecting these companies as the major players.

IMPACT ON THE INDUSTRY

Since these (ENGRO, FFC) are the major players of this industry, they enjoy as the price
setter in the industry. They have so much influence on the other players and they are
also a barrier to the new entrants. The new comers will not have to face intense
competition but huge competitors like these.

TRADE ASSOCIATION
In this particular industry, there is no local trade association in the country. The country is
the member of the International Fertilizer Association (IFA). Pakistan trade Union defense
campaign (PTUDC) which works for safeguarding the rights of the workers.
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PHOENIX
REGULATIONS OF OTHER INTERNATIONAL
TREATIES
International Fertilizer Association:12
IFA developed a series of 12 principles for use in fertilizer operations globally.

1. All members shall demonstrate leadership and management commitment with

regards to safety, security, health and environmental issues in fertilizer production,
distribution and sales.
2. All members shall attempt for zero harm and adverse environmental impact
whilst maintaining a healthy work place for all employees and contractual staff.
3. All members shall ensure that safety, security, health and environment issues are
integrated into their corporate policy and receive the highest importance and
priority.
4. All members shall ensure adequate financial and human resources for continual
improvement of safety, security, health and the environment performance.
5. All members shall comply with local safety, security, health and environmental
laws and strive to embrace international laws and best practices as much as
possible.
6. All members shall establish and improve their safety, security, health and
environmental performance through annual objectives, targets or key performance
indicators.
7. All members shall establish adequate procedures and controls to ensure that
safety, security, health and environment are not put at risk at any time or in any
form.
8. All members shall ensure that all employees and contractual staff have the right
competence and are adequately trained and informed about safety, security, health
and environment related to their specific activities, and shall encourage the
participation of employees and contractual staff for further improvements.
9. All members shall adhere to the principles of hazard and risk assessment in
evaluating all their activities to ensure that safety, security, health and environment
standards are continually enhanced.
10. All members shall strive to subscribe to safety, security, health and environment
management systems that will be subjected to internal and external auditing.
11. All members shall voluntarily share information with regards to experiences and
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lessons related to safety, health and the environment with all employees and
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PHOENIX
 contractual staff, and with other IFA members, unless under legal constraints or if
the information is of proprietary nature.
12. All members shall strive to continually promote safety, security, health and
environmental matters to enhance the social responsibility and accountability of the
global fertilizer industry.

PAKISTANI INDUSTRY
Pakistani industry coped up with these international requirements by doing several
measures/actions:13

 Organizations fulfill all applicable laws and regulations relating to Health and Safety
measures.
 Providing necessary awareness and training programs in order to fulfill necessary
requirements.
 Evaluating the impact on Health, Safety, and Environment whenever implementing any
new process or any modification in existing process.
 Occasionally evaluating all facilities like plants, environments to improve the
implementation of the policy more effectively and to find out whether all the
requirements are fulfilling or not.
 Companies are also obtaining ISO Certifications, so that anyone whenever wants, check
their standards of management.

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http://www.dawoodhercules.com/policy_eng.html

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ECOMONIC IMPACT OF WTO
The impact of WTO will be discussed by the considering the contract GATT article VI:
Article VI14
Anti-dumping Duties
1. The contracting parties recognize that dumping, by which products of one country
are introduced into the commerce of another country at less than the normal value
of the products, is to be condemned if it causes or threatens material injury to an
established industry in the territory of a contracting party or materially retards the
establishment of a domestic industry. For the purposes of this Article, a product is to
be considered as being introduced into the commerce of an importing country at
less than its normal value, if the price of the product exported from one country to
another

(a) Is less than the comparable price, in the ordinary course of trade, for the like
product when destined for consumption in the exporting country, or,

(b) In the absence of such domestic price, is less than either

(i) The highest comparable price for the like product for export to any
third country in the ordinary course of trade, or

(ii) The cost of production of the product in the country of origin plus a
reasonable addition for selling cost and profit.

2. In order to offset or prevent dumping, a contracting party may levy on any

dumped product an anti dumping duty not greater in amount than the margin of
dumping in respect of such product.

IMPACT ON PAKISTANI ECOMOMY15

The dumping of foreign fertilizer has hindered the growth of the local industry and
resulted in decline in its net margins and profitability. Engro Chemical's net Income in the
first quarter of 1999 (January to March) eroded by 46 per cent to Rs.247 million, as against
Rs.454 million during the corresponding period a year earlier. The company sold 175,000
tones urea during the quarter, as against 202,000 tones sold in the same period last year.
28
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14
http://www.wto.org/english/docs_e/legal _e/ga tt47_e.pdf
15
http://findarticles.com/p/articles/mi_hb092/is_8_30/ai_n28754170/

PHOENIX
The sales revenue amounted to Rs. 1.643 billion as against Rs. 1.721 billion of the
corresponding periods a year ago.
The drop in sales was due to imported urea. Excess supply of urea in the international
market and the absence of any anti-dumping duties have made Pakistan a target for
dumping by the producers in certain countries.

According to market sources there is no custom duty or other tariff barriers against
import of fertilizer and anyone is free to import. As a consequence, certain countries
whenever facing problem in selling urea in international market, they finding more
convenient to dump their products in Pakistan. In the present situation the fertilizer
industry is falling under the pressure of declining prices and cost push pressures.

The industry has been requesting the Government to impose antidumping or regulatory
duty. The fertilizer producers, while being supportive of the deregulated and free market
mechanisms, are seeking protection against dumping, which causes unfair competition.
This article not only saved the local industry of the country, as well as gave them
chance to grow.

ECOMONIC IMPACT OF WTO IN OTHER

COUNTRIES
Dumping problem is not only affecting the Pakistani industry but to all over the world. Those
countries that are not imposing tariff barriers and custom duty are facing this problem.
China, India and other European Countries were also affecting but their Government protects
them from this situation by imposing anti-dumping and high tariff duties.

DIFFERENCE OF IMPACT
There would be no difference as far as the impact is concern. By not imposing tariff barriers
29

and high custom duty against import, all the countries would face the same problem i.e.
Page

high import which will destroy local industry.

PHOENIX
INCENTIVES OFFERED
The Government has provided following incentives under Fertilizer Policy, 2001, to
encourage fertilizer production in the country:

 To fulfill local demand of fertilizers at affordable prices, the Government is

providing subsidy on production and import of fertilizers.
 Investors will be allowed to relocate second hand plant, equipment and machinery,
with the same concession/exemption as applicable to new plants.
 The Government is providing concessionary feed stock gas to the fertilizer plants for
production of urea.
 Import by manufacturers of Rock Phosphate and Phosphorous of fertilizer free of
customs duty.
 Tax relaxation has also been offered by the Government.
 Export benefit to suppliers of capital goods for new/modernization projects of
fertilizer.
 Gas price has been fixed for 10 years for new investments.
 Gas for balancing, modernization, replacement expansion for existing plants has
been filed for 7 years.

INCENTIVES OFFERED IN PAST

All these incentives mentioned above are being offered from the beginning.

INCENTIVES THAT INDUSTRY ASKING FOR

Industry is asking for the following incentives:

 Subsidy on the production.

30

 Tax relaxation
Page

 Custom free import of raw material and machinery.

 Low prices of Natural gas.

PHOENIX
  Grantee of gas supply for both Fuel and Feeds.

BENEFITS BY THE INDUSTRY

 The major benefit that industry is providing is the Employment, as with increase in
plants of the industry all the related network is also expanding like increase in
warehouses, transportation and so. This will increase employment.
 Companies also participating in social welfare activities. For example in education,
helping earth quake victims, supporting infrastructure and in health sector.16

INCENTIVES OFFERED TO THE OTHER

COUNTRIES

SRI LANKA17
Special fertilizer subsidy for small tea estate owners in Sri Lanka

Sri Lanka government has decided to activate the fertilizer subsidiary for tea small
holders proposed in this year's budget.

Plantations Minister D.M Jayaratna said the decision was taken during a special meeting
held last evening at the Presidential Secretariat with the officials of Agriculture Ministry
and fertilizer companies.

Under the subsidy a 50 kilogram fertilizer bag will be sold at Rs. 1,000 for the small tea
estate owners from today, the Plantation Ministry announced.

NEPAL18
Some of the incentives that can be expected are
 Rs 1.5 billion subsidies for chemical fertilizer.
 50 percent capital grants to import machinery for fertilizer industry.
 Concessionary tax policy.
31

16
http://engro.com/corporate_responsibility/index.php
Page

17http://www.colombopage.com/archive_09/January1570550RA.html

18 http://www.myrepublica.com/portal/printable_news.php?news_id=8799

PHOENIX
  Continuation of interest subsidy to small farmers.

INDONESIA 19
During the presentation of the draft 2010 budget earlier this month, the government
announced it would slash the amount it would pay for fertilizer subsidies by 35 percent next
year — to only Rp 11.3 trillion.

CONCULSION:
So, by looking at other countries, it can be said that the incentives being offered in these countries
and our country don’t have much of a difference. They are almost same, in all the mentioned countries
and our country the subsidy is being provided in one way or other.

PRODUCTION PROCESS OF FERTILIZERS

We have selected these two products for production process:

 Urea

 Single Super Phosphate

UREA MANUFACTURING PROCESS 20

Urea is produced from ammonia and carbon dioxide in two equilibrium reactions:

2NH3 + CO2 NH2COONH4

Ammonium carbonate

NH2COONH4 NH2CONH2 + H2O

Urea

Step 1 - Synthesis
A mixture of compressed CO2 and ammonia at 240 bars is reacted to form ammonium
carbonate. This is an exothermic reaction, and heat is recovered by a boiler which reduces
steam. If the mixture remains in the reactor long enough, the second reaction takes place:
ammonium carbonate splits into water and urea.
32

Step 2 - Purification
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19http://thejakartaglobe.com/business/indonesia-moving-too-far-too-fast-on-fertilizer-subsidies-farmers/324933

20
http://www.scribd.com/doc/18793009/Ammonia -and-Urea Production1?from_email_04_friend_send=1&emid=2238566

PHOENIX
 The major impurities in the mixture at this stage are water from the urea production
reaction and unconsumed reactants (ammonia, carbon dioxide and ammonium carbonate).
The unconsumed reactants are removed in three stages3. Firstly, the pressure is reduced
from 240 to 17 bars and the solution is heated, which causes the ammonium carbonate to
decompose to ammonia and carbon dioxide:

NH2COONH4 2NH3 + CO2

At the same time, some of the ammonia and carbon dioxide flash off. The pressure is
then reduced to 2.0 bar and finally to -0.35 bar, with more ammonia and carbon dioxide
being lost at each stage. By the time the mixture is at -0.35 bar a solution of urea dissolved
in water and free of other impurities remains.

At each stage the unconsumed reactants are absorbed into a water solution which is
recycled to the secondary reactor. The excess ammonia is purified and used as feedstock to
the primary reactor.

Step 3 - Concentration

75% of the urea solution is heated under vacuum, which evaporates off some of the
water, increasing the urea concentration from 68% w/w to 80% w/w. At this stage some
urea crystals also form. The solution is then heated from 80 to 110oC to re dissolve these
crystals prior to evaporation. In the evaporation stage molten urea (99% w/w) is produced
at 140oC.

The remaining 25% of the 68% w/w urea solution is processed under vacuum at 135oC
in a two series evaporator-separator arrangement.

Step 4 - Granulation
Urea is sold for fertilizer as 2 - 4 mm diameter granules. These granules are formed by
33

spraying molten urea onto seed granules which are supported on a bed of air. This occurs
Page

in a granulator which receives the seed granules at one end and discha rges enlarged
granules at the other as molten urea is sprayed through nozzles. Dry, cool granules are

PHOENIX
classified using screens. Oversized granules are crushed and combined with undersized
ones for use as seed.

All dust and air from the granulator is removed by a fan into a dust scrubber, which
removes the urea with a water solution then discharges the air to the atmosphere. The final
product is cooled in air, weighed and conveyed to bulk storage ready for sale.

SINGLE SUPER PHOSPHATE MANUFACTURING PROCESS 21

Single Super Phosphate, is manufactured in the fertilizer industry by the reaction of the
sulfuric acid with the phosphorous penta oxide.

Solid sulfur, S(s), is burned in air to form sulfur dioxide gas, SO 2

S(s) + O2 (g) SO2 (g)

The mixture of sulfur dioxide and air is heated to 450 oC and subjected to a pressure of
101.3 - 202.6 kPa (1 -2 atmospheres) in the presence of a vanadium catalyst (vanadium (V)
oxide) to produce sulfur trioxide, SO3 (g), with a yield of 98%.

2SO2(g) + O2 (g) 2SO3(g)

Sulfur trioxide, SO3 (g) is dissolved in 98% sulfuric acid, H 2SO4, to produce disulfuric
acid, also known as fuming sulfuric acid or oleum, H 2S2O7.

SO3 (g) + H2SO4 H2S2O7

Water is added to the disulphuric acid, H 2S2O7, to produce dilute sulfuric acid, H2SO4

H2S2O7 (l) + H2O (l) 2H2SO4(l)

Sulfuric acid is added to the ground/crushed phosphate rock.

Phosphoric content is kept at 16-21% for which phosphoric Penta oxide is used (P 2O5).
34
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21
http://www.patelenterprises.net/ssp-fertilizer-manufacturing-plant.html

PHOENIX
SSP production involves mixing the sulfuric acid and the rock in a reactor followed by
discharging the reaction mixture on to a slow moving conveyor in a den. It is cured for 4 to
6 weeks before bagging and shipping.

DETERMINANTS OF FIXED COSTS

 Salaries & Wages
 Deprecation
 Allocated Costs
 Taxes

DETERMINANTS OF VARIABLE COSTS

 Gas as Feed Stock
 Gas as Fuel
 Canal Water
 Chemicals
 Catalyst
 Maintenances of Stores
 Packing Materials
 Containers
 Contract Labors
 Electricity Duty
 Other Expanses (Allocated)

PRICE LIST OF PRODUSTS

Engro Chemicals Company Ltd:22

Products Prices
Zorawar 1858/Bag
35
Page

22
http://engro.pakissan.com/engropk/fertilizer.rates/index.shtml

PHOENIX
 Zingro – Danedar 455/Bag

Zarkheez Green 1880/Bag

Engro Urea 750/Bag

Zarkheez Blue 1730/Bag

Zarkheez Tobacco 1735/Bag

Fauji Fertilizer Company Ltd.

Products Prices

Sona Urea 525/bag

Sona DAP 1050/bag

Dawood Hercules Company Ltd.:

Products Prices

Bubber Sher 710-880/bag

Fatima Fertilizer Company Ltd.:

Products Prices
36
Page

Calcium Ammonium Nitrate (CAN) 450/Bag

PHOENIX
 Nitro-phosphate (NP) 810/bag

Urea 710/bag

PRICING MODEL
Price = f (Governmental Policies + Monetary Policies + Inflation +
Availability of Feed & Fuel Gas)

Where,
Governmental Policies = Ban on Export, Anti-Dumping Duty
Monetary Policies = Subsidy, No Custom Duty on Import of Equipments
& Raw Material.
Inflation = Increases in Gas Prices, Transportation Cost because of
increase in Fuel Price.
Availability of Feed & Fuel Gas = Continuous Supply of Natural Gas for
both fuel and feed.

37
Page

PHOENIX
ECONOMIC IMPACT ON THE INDUSTRY
The economy of the country does have considerable impact on the fertilizer industry
in the following ways:
The cost of this industry is quite high which is very difficult for the economy of the
country to support especially in current circumstances.
Natural Gas is the main requirement of this industry and it is very difficult to fulfill
that. Recently the government has announced the cut in the supply of the Natural
Gas in the shape of load shedding.
When there is a boom in the agriculture sector of the economy, the demand of the
fertilizers also gets increased which puts positive effects on the industry .

HUMAN RESOURCE ISSUES IN INDUSTRY

There would not be any of such issues in the industry as the educated human resource is easily
available and for further enhancement in performance training should be conducted in companies
both technical and interpersonal.

HURDLES IN MARKETING:
 Weak competition or shortages may lead to price gouging and/or product
adulteration.
 Rigid and slow reaction to market changes.
 New entrants discouraged.
 Uneducated target market because of this marketing is difficult.
 Prices are not same in all over Pakistan.
 Ineffective distribution process.
38
Page

PHOENIX
 FINANCING EASILY AVAILABLE
Financing is easily available in this sector. The government is willing to develop this sector so that it
would fulfill the requirements.
Recently, two plants are opening; one is of Fatima Fertilizer and one of Engro Ammonia Plant. In
project of Engro Ammonia Plant there is total investment of $1billion is needed, for which it has
signed a syndicate loan of Rs 18.3 billion.

IMPACT OF POLITICAL PARTIES

As in Pakistan, there is a culture that all of the work related to Government would be easier only
when you have good relationship with these parties.
Fertilizer Industry has too much concern with the Government for availability of Natural Gas and
Water, subsidy, anti-dumping duty, and custom free import and so on. All these factors have
considerable effect on the profitability of the companies and without political parties help,
companies will not be able to get these benefits.
In the industry, all companies have very good and stable relation with the political parties and
therefore enjoy benefits which they want to.
So, we can say that the impact of political parties is positive on this industry.

TRADE ISSUES RELATED TO FERTILIZER

INDUSTRY

1. Agreement is being made that the market forces will be allowed to work, in the case of
fertilizer imports.

2. To stop dumping in fertilizer industry the WTO regulation related to anti dumping must be
applied in the industry for the industry benefit.

3. In case of import the fertilizer producing companies are exempted where as the non
39

producing private importers pay 5% of the value on the imported fertilizer.

Page

PHOENIX
 4. The introduction of General Sales Tax on fertilizers should be carefully considered since it
would have serious implications on price relations.

5. Market information and monitoring by the National Fertilizer Development Centre should be
strengthened to serve as a real information center for the fertilizer sector.

PROPOSALS GIVEN BY PEOPLE OF

FERTILIZER INDUSTRY
 The first point in proposal was about career development of employees People working in
one section or department from years are still with the same knowledge and style of doing
job.

 There should be proper career planning of employee which results in better and improved
output for the organization.

 Some employees are working in the same department or section since they are appointed.
Employees should be transferred with in departments so there is job variety that develops
their interests, update their information and improve their performance.

 Due to high rate of unemployment in the country people join those jobs which are against
their interest so proper analysis should be done and explore those employee which can do
better what they are currently doing in the organization

 Management should take necessary action in implementing the safety rules in the
organization. 40
Page

PHOENIX
OUR PROPOSALS

 Strict quality control and monitoring should be there to prevent import of sub-standard
products.

 The problem of logistics should be looked into. Transportation through railway (being
cheaper), especially during peak seasons should be made available.

 There is a need to educate the farmers on balanced fertilizer use so as to neutralize the
adverse impacts of constant use of nitrogenous fertilizers.

HUMAN RESOURCE REQUIREMENTS OF

FERTILIZER INDUSTRY
Hiring quality manpower, keeping them happy, satisfied and motivated are the pillars of
the Human Resources Department; justice, fair play and merit oriented treatment are some
of the ingredients of processing cases by the Human Resources Department.
For Human Resource development, another aspect which receives its due share is training.
The employees are exposed to various kinds of cross training, technical cou rses,
management courses, workshops and seminars both at home and abroad. Employees'
welfare has all along received due consideration by the Management

Handling cases relating to following subjects

 Employment/appointment of non management employees. Temporary / contract /daily

wages according to authorization.
 Promotion of non management employees
 Pay and allowances of non management employees.
41

 Leaves (annual, causal, special, sick) are managed for all employees.
Page

 Transfer claims of all employees.

PHOENIX
  House/rent allowances advances.
 House building loans.

SORT OF PEOPLE NEEDED

1. PLANNING ENGINEER :23

JOB TITLE:
Planning Engineer

JOB DESCRIPTION:
Should have strong technical, analytical and problem solving capabilities. And
consist of the ability to achieve excellent performance in individual and team
environment.
JOB SPECIFICATION:
5-8 years experience required.

2. CORPORATE LAWTER:

JOB TITLE:
Corporate Lawyer

JOB DESCRIPTION:
The lawyer should have the potential to handle civil and corporate
law matters independently. Be Creative and self-motivated and excellent
interpersonal skills.

JOB SPECIFICATION:
Minimum 5 year experience required.

3. MANAGER PUBLIC AFFAIRS

JOB TITLE:24
Manager Public Affairs

JOB DESCRIPTION:
42
Page

23
http://www.careerjet.com.pk/job/2639b323ea9699708429fbfa634117f6.html
24 http://www.careerjet.com.pk/job/807ebea9118d2e079fea51b0d50c01a9.html

PHOENIX
 Should have strong leadership skills nd have ability to plan and coordinate with
internal and external stakeholders. Excellent communication skills and Event
Management experience.
JOB SPECIFICATION:
Energetic and experienced individual required.

4. MILLRIGTHS TECHNICIANS

JOB TITLE:
Millrights Technician

JOB DESCRIPTION:
Hands on maintenance experience of centrifugal compressors/pumps reciprocating
pumps and turbines. Should have good knowledge, of frequently used material at
fertilizer plants. Skills in diagnostic and troubleshooting of machine problems
through vibration analysis are essential.

SPECIFIC TRAINING INSTITUTIONS

Following training institutions are available:

1. NFC Institute of Engineering and Technological Training

2. Technical Training Center (TTC)

1. NFC INSTITUTE OF ENGINEERING AND TECHNOLOGY TRAINING

The NFC Institute of Engineering and Technological Training is the training center of the
National Fertilizer Corporation of Pakistan. It is a small engineering college established to meet
the requirement of trained manpower for chemical process industry, especially in the fertilizer
sector. a Training Centre was established in 1985.
It trains:
 Managers
43

 Engineers
Page

 Supervisors
 Operators and Technicians

PHOENIX
 2. TECHNICAL TRAINING CENTER 25

Technical Training Center (TTC) lies in its expert faculty having rich plant operation and
maintenance experience, functional pilot plants, well equipped shops for practice and access to FFC
operating plants for real life demonstration. This institution conducts following programs:

Training of engineers & technicians customized to Client’s specific needs.

Fertilizer Technology Course for fresh engineers.
Professional Management Curses.
Apprenticeship Programs for operators & technicians.
Skill Improvement Programs for operators & technicians in the areas of Plant Operations,
Maintenance & Safety.

Supplier Power

 In this industry supplier has a high bargaining power, as most of them are Foreign
Groups.
 Concentration is low. They act as separate groups competing for the same project.
 High Switching cost because it is difficult to contract with other groups and deal with
them.
 No threat of forward integration.
44
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25
http://www.paktechsearch.com/ffc_page4.asp

PHOENIX
Buyers Power
 Although Buyers are large in numbers and purchases a large quantity as well, but buyers
do not have a bargaining power. There is no forum available that protects them, and
this group is not educated enough to fight for their rights. All what has happened, is
done by the Government.
 There are two substitute products available, Imported Fertilizer and Bio-Fertilizer.
Production of bio-fertilizer is almost over and imported fertilizer is available at the
same price because of anti-dumping duty and Government regulations for the
prices of fertilizer for particular seasons are fixed.
 Switching cost is low but does not have significant effect due to fixed prices.

Potential Entrants

There are number of barriers to entry such, as capital requirements, government

policies, reputation of existing firms and ecological surveys.

 Huge capital requirement is one of the greatest barriers for entry.

 Government Policies and regulation are also act as barriers; because Natural Gas
which is the main raw material of the industry, and the prices and supply of it is
completely depend upon the Government. As before government was charging feed
gas at lower rate and Fuel gas at higher rate. But now they are being charged at the
same rate. Government does not easily give permission for manufacturing plant due
to shortage of Natural gas and harmful environmental effects, this also act as a
barrier.
 Massive Ecological surveys must be done before companies can begin production.
 Brand reputation of existing companies is also one of the barriers because customers
do not easily get ready to switch.
45
Page

PHOENIX
Substitutes

 There are two substitute available

1. Imported Fertilizer
2. Bio-Fertilizer
 Suitability of Alternatives: imported fertilizer is as suitable as the industry products
are. Bio-fertilizer is more suitable to use then the industry products, as it has no
harmful environmental effects, cheap to produce and it also enhance the fertility
of the soil. Whereas our product reduces the natural fertility, but its production
is almost over. Therefore industry does not have a threat of substitutes.
 Switching costs is low.

Rivalry
 Fixed Costs are too high, which is not easily possible to tolerate. It reduces the
competition.
 Industry is at maturity stage so; competition on the basis of growth is low.
 Prices are fixed for every season so no competition on the basis of pricing behavior.
 Competition is only on the basis of Quality.

MARKET
The target market of the industry can be divided in to two parts:

1. Farmers
46

2. Land owners
Page

PHOENIX
TREND ANALYSIS
Political Trend:

Political trends are always in favor of this industry. The Government has provided
following incentives under Fertilizer Policy, 2001, to encourage fertilizer production in the
country:
 To fulfill local demand of fertilizers at affordable prices, the Government is
providing subsidy on production and import of fertilizers.
 Investors will be allowed to relocate second hand plant, equipment and machinery,
with the same concession/exemption as applicable to new plants.
 The Government is providing concessionary feed stock gas to the fertilizer plants for
production of urea.
 Import by manufacturers of Rock Phosphate and Phosphorous of fertilizer free of
customs duty.
 Tax relaxation has also been offered by the Government.
 Export benefit to suppliers of capital goods for new/modernization projects of
fertilizer.
 Gas price has been fixed for 10 years for new investments.
 Gas for balancing, modernization, replacement expansion for existing plants has
been filed for 7 years.

Economical Trend:
One of the main sectors of economy is Agricultural as it contributes 22% to the GDP and
without Fertilizer industry this sector would not able to work. Due to that Gover nment
always gives support to the fertilizer industry.
 Import by manufacturers of Rock Phosphate and Phosphorous of fertilizer free of
customs duty.
 Tax relaxation has been offered in order to attract new entrants.
47
Page

PHOENIX
  Export benefit to suppliers of capital goods for new/modernization projects of
fertilizer. To reduce the dependence on imported fertilizers by enhancing the local
production capacity.
 The Government is providing subsidy on production and import of fertilizers. a
massive subsidy of Rs. 27 billion in the supply of urea and DAP in 2009.
 Ban on export of fertilizer is also imposed so that economic stability would be gain.

Social Trends:

Although the adverse effects of this industry is very high because of the improper
handling of the waste. Due to this, many diseases like asthma, kidney diseases, hepatitis
etc...are caused. Still, the usage of the fertilizers cannot be stopped because it gives farmers
so much ease in terms of saving time and actually, using it. Making bio -fertilizer has now
become an old usage and farmers don’t prefer to use it against artificial fertilizer.

Technological Trend:

 To meet the demand of fertilizers in the country through indigenous production,

self-reliance in design engineering and execution of fertilizer projects is very crucial.
This requires a strong indigenous technological base in planning, development of
process know-how, detailed engineering and expertise in project management and
execution of projects.

 The fertilizer plant operators have now fully absorbed and assimilated the latest
technological developments, incorporating environmental friendly process
technologies, and are in a position to operate and maintain the plants at their
optimum levels and on international standards in terms of capacity utilization,
specific energy consumption & pollution standards. The average performance of
gas-based plants in the country today is amongst the best in the world.

 The fertilizer industry is also carrying out de-bottlenecking and energy saving
scheme in their existing plants and to enhance the capacity and reduce the specific
energy consumption per ton of product. Companies are also planning to convert to
Liquefied Natural Gas (LNG).
48

Legal Trend:
Page

These legal trends are being practicing:

PHOENIX
  Strengthening the Fertilizer Review Committee.
 Rationalization of quotas to private marketing organizations.
 Setting up of transport sub-agencies.
 Replacement of volumetric bagging machines at Port Karachi by weight baggers, to
ensure accuracy.
 Drafting and enactment of fertilizer legislation to provide a legal framework within
which marketing agencies and dealers should operate in a privatized system.
 Pursuing low-cost storage options in high consumption areas, and purchasing off-
season at a discount.
 Postponing widespread custom blending until inland bulk handling is practiced.

Environmental Trend: 26

 Chemical fertilizer in the form of salts, when added to soils gets converted into ionic
forms after dissolving in the soil solution. They are relatively safer than pesticides
which exhibit toxic properties on living systems. However, all the quantities of
fertilizers applied to the soil are not fully utilized by plants. About 50 per cent of
fertilizers applied to crops are left behind as residues. Though, inorganic fertilizers
are not directly toxic to man and other life forms, they have been found to upset the
existing ecological balance. The nutrients escape from the fields and are found in
excessive quantities in under ground water, rivers, lakes and coastal waters.

 Fertilizers can become a source of pollution when they are used in excess. Among
the three macro (N-P-K) fertilizers being used at present, only potassium fertilizer is
not yet considered a source of environmental pollution. The other substances like
nitrogen (urea or calcium ammonium nitrate) and phosphorus (DAP or MAP)
fertilizers, if used unreasonably, can cause environmental pollution and mainly
through increase of nitrate in agricultural products, drinking water, entropication of
water sources and increase of cadmium.

 Another hazard associated with excessive use of nitrogenous fertilizers is the

gaseous loss of nitrogen, into the atmosphere. High doses of carbon dioxide and
ammonia that escape into the atmosphere both from fertilizer manufacturing plants
and soils affect human health. Further the oxides of nitrogen have been reported to
adversely affect the ozone layer.
49

 The oxides of nitrogen cause respiratory diseases like asthma, lung cancer and
Page

bronchitis.

26
http://www.pakissan.com/english/issues/fertilizers.and.environmental.pollution.shtml

PHOENIX
  Cadmium accumulation in agricultural products is also an important problem of
pollution. Cadmium exposures result in kidney damage, bone deformities, and
cardiovascular problems.

Demographical Trend:
 At present, eight children are born per minute in Pakistan, as Pakistan is developing
country, with limited ability to feed their growing populations or import food.
Application of chemical fertilizer to soil systems for increasing production and
maintaining soil fertility has been essential to increasing food production and will
be essential in future.

PORTER’S FIVE FORCES MODEL

Supplier Power

 In this industry supplier has a high bargaining power, as most of them are Foreign
Groups.
 Concentration is low. They act as separate groups competing for the same project.
 High Switching cost because it is difficult to contract with other groups and deal with
them.
 No threat of forward integration .

Buyers Power

 Although Buyers are large in numbers and purchases a large quantity as well, but
buyers do not have a bargaining power. There is no forum available that protects
them, and this group is not educated enough to fight for their rights. All what has
happened, is done by the Government.
 There are two substitute products available, Imported Fertilizer and Bio-Fertilizer.
Production of bio-fertilizer is almost over and imported fertilizer is available at the
same price because of anti-dumping duty and Government regulations for the
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prices of fertilizer for particular seasons are fixed.

Page

 Switching cost is low but does not have significant effect due to fixed prices.

PHOENIX
Potential Entrants

There are number of barriers to entry such, as capital requirements, government

policies, reputation of existing firms and ecological surveys.

 Huge capital requirement is one of the greatest barriers for entry.

 Government Policies and regulation are also act as barriers; because Natural Gas
which is the main raw material of the industry, and the prices and supply of it is
completely depend upon the Government. As before government was charging feed
gas at lower rate and Fuel gas at higher rate. But now they are being charged at the
same rate. Government does not easily give permission for manufacturing plant due
to shortage of Natural gas and harmful environmental effects, this also act as a
barrier.
 Massive Ecological surveys must be done before companies can begin production.
 Brand reputation of existing companies is also one of the barriers because customers
do not easily get ready to switch.

Substitutes

 There are two substitute available

3. Imported Fertilizer
4. Bio-Fertilizer
 Suitability of Alternatives: imported fertilizer is as suitable as the industry
products are. Bio-fertilizer is more suitable to use then the industry products, as
it has no harmful environmental effects, cheap to produce and it also enhance
the fertility of the soil. Whereas our product reduces the natural fertility, but its
production is almost over. Therefore industry does not have a threat of
substitutes.
 Switching costs is low.
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PHOENIX
Rivalry

 Fixed Costs are too high, which is not easily possible to tolerate. It reduces the competition.
 Industry is at maturity stage so; competition on the basis of growth is low.
 Prices are fixed for every season so no competition on the basis of pricing behavior.
 Competition is only on the basis of Quality.

SWOT ANALYSIS
Strengths:
 The players operating in this sector are financially strong and they can start
production of new product line. Adding some new unit can enhance the production
capacity of the plants.
 All the fertilizer plants are producing at more than 100 per cent installed capacity of
utilization.
 Demand is heavy because, being an agriculture country and due to increasing
awareness about the balanced use of fertilizer, demand for the fertilizer will
increase.
 Industry has well distribution centers.
 Fertilizer industry peruses an innovative education oriented advertising policy
utilizing electronic/ print media and road side advertisement.
 All companies in the industry have developed a well planned network field
warehouses to ensure that fertilizers are available to the farmers uninterrupted.

Weakness:
 Due to the existence of black market and heavy demand, farmers have to pay above
then the stated price.
 Demand is more and capacity of plants to produce fertilizers is less.
 Fertilizer sector is backward in technology and also lack in resources.
 Low advertising campaigns as growers and farmers are not educated and lives in
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villages, so they don’t exactly know the balanced use of fertilizer.

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PHOENIX
Opportunities:
 If the quality is good customer will buy your product. By improving the quality of
products, industry can attract more customers and can retain customers by
satisfying their needs.
 There is no quota restriction by WTO since 2005, so there are more chances of
export.
 Availability of gas from Iran can increase the production of plants and industry c an
fulfill the demands.
 Government is giving support to fertilizer sector…
 As demand is high comparing to supply, fertilizer sector has an opportunity to
expand the capacity to fulfill the local demand.
 As Pakistan is an agricultural country and farmers are getting awareness about the
balanced use of fertilizer, demand of fertilizer has increased.

Threats:
 As natural gas is the main raw material, load shedding of natural gas is big threat.
 Imported fertilizer is available at cheap prices than local fertilizer.
 Unstable political condition in the country is also a big threat to fertilizer industry.
 Prices of fuel and gas have increased enormously.
 Global prices of fertilizer products are also increasing which is causing increase in
fertilizer prices in the country.
 Bio fertilizer is the main threat to the industry because it is cheap and also
environment friendly.
 Government policies are not consistent regarding fertilizer industry.

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PHOENIX
SWOT –I MATRIX
Strengths:

S1: The players operating in this sector are financially strong.

S2: GoP supports in the form of subsidy.
S3: Cheap labor.
S4: Heavy demand.
S5: An agro based economy.
Weaknesses:

W1: Low capacity as compared to demand (demand supply Gap).

W2: Due to existence of black market and heavy demand Farmers had to pay
above the stated price.
W3: Technological backwardness: Lack of local resources.
3. Opportunities:

O1: As the demand is high compared to supply, fertilizer sector has an

opportunity to expand capacity to fulfill the local demand.
O2: Export.
O3: Introduction of BT crops.
4. Threats:
T1: Scarce water resources.
T2: Load-shedding of gas.
T3: Hike in fuel prices.
T4: Taxes.
T5: Removal of subsidy.
T6: Rising global prices of fertilizer products.
T7: Government intervenes to stabilize the prices.
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PHOENIX
SWOT –i matrix

Opportunities Threats

S1 O1
S2 T5
Strengths Players financially strong – Subsidy by Gop-removal of
demand is high expand subsidy,
capacity
S4 T7
heavy demand-Gop stabilizes
the prices,

S5 T1
Agro based economy-scarce
water resource

W1 O1 , W1 T2
Demand/supply gap- Demand/supply gap-load
Weaknesses demand is high expand shedding of gas
capacity W1 T3
Demand/supply gap-hike in
fuel prices
W2 T6
Black market high prices to
farmers-rise in global prices of
fertilizer
W2 T5
Black market high prices to
farmers-Removal of subsidy
W2 T7
Black market high prices to
farmers-government fixed the
fertilizer prices
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PHOENIX
STRATGIC PLAN
Load shedding of gas is the biggest problem because gas is the most important

component used in fertilizer industry both as stock and as fuel so this creates the problem

the fertilizer industry should demand for availability of gas.

The government should check the prices at which the farmers ar e getting fertilizer they

should make a platform for farmers where they can come up with such problems.

A list of fertilizer prices should be provided by the government to the local shops so that

the farmers are aware of the prices which the government has set and are save from black

market.

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PHOENIX
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PHOENIX
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PHOENIX
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