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:

Page

Mr. QAZI SALMAN

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

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

PHOENIX

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PAKISTANI INDUSTRY ........................................................................................................................27

REGULATIONS OF OTHER INTERNATIONAL TREATIES ..........................................................................26

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

SPECIFIC TRAINING INSTITUTIONS .....................................................................................................43

Supplier Power .................................................................................................................................44
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SORT OF PEOPLE NEEDED..................................................................................................................42

HUMAN RESOURCE REQUIREMENTS OF FERTILIZER INDUSTRY............................................................41

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
PORTERS 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

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Bibliography.....................................................................................................................................57

PHOENIX

PRODUCTS
1.
2.
3.
4.
5.
6.
7.
8.

Urea,
Di-Ammonium Phosphate (DAP
Calcium Ammonium Nitrate (CAN)
Ammonium Sulphate (AS)
Single Super Phosphate (SSP)
Nitro phosphate (NP)
Sulphate of Potash
Zinc Sulphate

1. Urea:
More than 90% of the worlds 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.
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.
4.

Single Super Phosphate:

Superphosphate is a fertilizer produced by the action of concentrated sulfuric acid
powdered phosphate rock.
5.

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
soluble in water. This chemical is commonly used in fertilizers, providing both
potassium and sulphur.
PHOENIX

Page

6.

on

BRANDS
1.
2.
3.
4.
5.

Engro Chemical Company Ltd

Fauji Fertilizer Company Ltd.
Dawood Hercules
Fatima Fertilizer Company Ltd.
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).

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

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Micro Nutrients:

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

Number of Factories/Plants

14

Page

Number of Compaines

SIZE OF INDUSTRY

PHOENIX

Tones in 000

2007-8(July-March)

2006-7

2005-6

FERTILIZER
PRODUCTION

1846.9

2735.2

2826

GEOGRAPHICAL LOCATION
FACTORIES LOCATION
CITIES
Bin Qasim
Sheikhupura
Sadiqabad, Rahim Yar Khan
Multan
Haripur
Faisalabad
Mirpur Mathelo, Dist Gotki
Daudkhel

NUMBER OF FACTORIES
2
1
2
1
2
1
1
1

WAREHOUSES
Mian Chunnu
Faisalabad
Khanewal
D.G. Khan
Dera Ismail Khan
Sukuar

Page

Lahore
Karachi
Larkana
Dadu
Thatta
Mirpur khs
Nawabsha
Multan
Sheikupura

PHOENIX

TOTAL PRODUCTION
(IN THOUSAND TONS)

YEAR

UREA

SUPER
PHOSPHATE

AMMOMIUM
NITRATE

NITRO
PHOSPHATE

AMMON I
UM SULPHATE

1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2007-2008
(JULY-MARCH)
2008-2009
(JULY-MARCH)

3521.7
3785.0
4005.1
4259.6
4401.9
4431.6
4606.4
4806.4
472.5
4924.9
3660.5

21.6
145.8
159.6
161.0
147.2
167.7
163.1
16.8
148.9
157.6
114.8

338.8
386.5
374.4
329.4
335.3
350.4
329.9
327.9
330.8
343.7
246.0

265.0
261.3
282.5
305.7
304.9
363.5
338.9
356.6
325.8
329.7
218.4

3652.4

143.2

245.7

218.4

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 Pakistans economy. It accounts for 24 percent
of the GDP and employs 48.4 percent of the total labor force.

TOTAL EXPORT

Number of new plants opened

Number of plants closed down

Page

NUMBER OF NEW PLANTS AND NUMBER OF

PLANTS CLOSED DOWN

10

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

1
1
PHOENIX

Page

11

TOTAL IMPORTS

PHOENIX

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
Therefore, the nationalization process which started from 1972, could not have impact on

Page

this particular industry.

12

not get nationalized because companies at that time neither were more in numbers, not big.

PHOENIX

CHRONOLOGICAL HISTORY OF THE

FERTILIZER SECTOR IN PAKISTAN

1959/60
1962
1965

1966/67
1973

1976
1978
1980
1982
1982
1985

1986
1989
1990
1991
1992
1993

1994

Esso (Exxon) announces its intentions to sell 75% of its

holdings in EPFC. Engro Chemicals Pakistan Limited is formed.
FFC was listed on Islamabad Stock Exchange.
FFC once again came forward and put up another urea
manufacturing facility at Goth Machhi to meet the growing
demand. The new plant commenced commercial production
FFC has been ranked 5th Best Company of the Karachi Stock
Exchange(KSE).

13

1958

Nitrogenous fertilizers were introduced in Pakistan.

Lyallpur Chemicals and Fertilizers Limited (LCFL) is set up
and designed to produce Single Super Phosphate (SSP).
Pak American Fertilizer Limited (PAFL) is commissioned and
designed to produce ammonium sulphate.
phosphorus introduced in Pakistan
National Gas Fertilizer Factory is set up producing Urea,
Ammonium Nitrate, and Nitric Acid.
Esso Pakistan Fertilizer Company Limited (EPFC) is
incorporated and designed to produce urea 1968 Designed
Capacity of PAFL is increased.
Potassium introduced in Pakistan.
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.
Capacity of LCFL is doubled.
NGFF is renamed Pak Arab Fertilizers after 48% stake is
acquired by Government of Abu Dhabi.
Pak Saudi Fertilizer Company is established designed to
produce urea.
Pak China Fertilizers Limited (PCFL) goes into commercial
production. It is designed to produce urea.
Fauji Fertilizer is established.
Hazara Phosphate Fertilizer Limited is incorporated and is
designed to produce Granulated Single Super Phosphate
Fertilizer.
Government deregulates prices of nitrogenous fertilizers
Fertilizer Policy is announced providing incentives for fresh
investment in the sector.

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1952
1957

1995
PHOENIX

1998
1998
1998

1999

1999
1999

2000
2000
2000
2001
2001
2001
2002
2002
2002
2003
2003
2003
2004
2004

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.
FFC commercial production commenced wef Jan 2000
FJFC DAP Plant brought to suspension due to accumulated
loss of Rs. 6.5 Billion.
Ministry of Industries and Production announced Fertilizer
Policy 2001.
Pak Saudi Fertilizer was purchased by FFC for a purchase
price of PkR7.3bn rupees.
A substantial decline in sales of Dawood Hercules ltd seen in
first half of the year.
FFC acquired Pak Saudi Fertilizer Ltd Urea Plant situated at
Maripur.
46 thousand tones of urea were exported.
FFC DAP Plant resumed production in Sep.
FFC obtained the certification of occupational health and
safety assessment series, OHSAS-18001:1999
Fatima Group and Arif Habib Group, incorporated in Dec 24
The Economic Coordination Committee decided to maintain
the ban on export of urea.
Pak Arab unit is in an advanced stage of privatization.

14

1997

FFC-Jordan fertilizer company was formally listed with stock

exchange in MAY.
International Finance Corporation (ifc) Washington D.S signed
an agreement to provide $ 18 million in loan to ENGRO
fertilizer Pakistan ltd.
FFC Jordan is established. It is the first company to locally
manufacture Di ammonium phosphate (DAP) in the country.
Engro in large part to investments made in the renovation of
its plants in 1998, which increased production by 14%.
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.
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.

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1996

PHOENIX

2005

2005

2006
2006
2006
2007
2007
2007
2008
2008
2008
2009
2009

2009

15

2005

Dawood Hercules has the privilege of being the first fertilizer

manufacturing company to obtain ISO-9001:2000 certification
in Pakistan.
July 14, Pak Arab Fertilizer was privatized at a cost of
Rs14.125 billion under privatization policy of Government of
Pakistan.
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
Dawood Hercules Chemicals Limited has been listed amongst
the 25 companies for the Karachi Stock Exchange (KSE) Top
Companies Award for 2005.
FFBL is its accreditation of ISO certification, which was
achieved in Mar 2006 for both the Head Office and Plant site.
Engro announces Rs. 2.55 billion profit for Financial Year 06 .
Engro Chemical wins prestigious Asian CSR Award.
Engro Chemical listed among top 5 Notable COPs in Chemical
Sector by United Nations Global Compact.
FFBL successfully completed Ammonia Plant.
Engro signed agreement with Descon Engineering Ltd for new
Ammonia and Urea Complex.
The industry provided a subsidy of Rs 100 billion to farmers
for the nine months ended September 30.
PIDC, Engro Chemicals to set up training center in Dharki .
PIDC approves Rs 100m for technical training center.
Engro reinforces commitment for improved HSE Management
Recent award of electromechanical works for the revamp of
Pak American Fertilizer Limited, Sikandarabad is yet another
significant accomplishment by Descon.
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.

Page

2004

PHOENIX

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:
Page

16

Rawalpindi

Regional Offices:
Multan

PHOENIX

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.

Page

17

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.

http://zubairad.com/images/img_profile_03.gif

PHOENIX

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18

http://www.ffc.com.pk/contents/framepages/ar_2008.pdf

PHOENIX

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 Exxons 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.

Clifton Karachi
3

www.engro.com

PHOENIX

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19

Location of Head Office:

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:

www.engro.pakissan.com
www.engro.com/.../fer tilizers/index.php

PHOENIX

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20

Dharki, Sindh.
Bin Qasim, Karachi

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21

http://www.engro.com/pdf/engro_annual_report08_final 1.pdf

PHOENIX

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.

22

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.
Page

HeadOffice Location:8
7

www.dawoodhercules.com/

PHOENIX

Empress Road, Lahore

Factory Loaction:
Chichoki Mallia, Shkhupura

Product Offered:

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

23

10

Page

www.dawoodhercules.com/contact.html
http://www.dawoodhercules.com/images/agronimics.jpg
10
http://static.panoramio.com/photos/original/14967593.jpg
9

PHOENIX

11

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24

11

http://www.dawoodhercules.com/reports/annual%20report%2008.pdf

PHOENIX

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

Page

25

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.

PHOENIX

REGULATIONS OF OTHER INTERNATIONAL

TREATIES
International Fertilizer Association:12

12

http://www.fertilizer.org/i fa/Home-Pa ge/SUSTAINABILITY/Sa fety-Heal th-Envi ronment-Principles

PHOENIX

Page

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
lessons related to safety, health and the environment with all employees and

26

IFA developed a series of 12 principles for use in fertilizer operations globally.

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

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27

their standards of management.

13

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

PHOENIX

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

14
15

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28

tones urea during the quarter, as against 202,000 tones sold in the same period last year.

http://www.wto.org/english/docs_e/legal _e/ga tt47_e.pdf

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.

and high custom duty against import, all the countries would face the same problem i.e.
high import which will destroy local industry.
PHOENIX

Page

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

29

DIFFERENCE OF IMPACT

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:

30

Subsidy on the production.

Tax relaxation
Custom free import of raw material and machinery.
Low prices of Natural gas.

Page

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
COUNTRIES

OFFERED

TO

THE

OTHER

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

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

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16

31

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.

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 dont 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

32

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.

Page

Step 2 - Purification
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

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

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

33

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

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.

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34

Phosphoric content is kept at 16-21% for which phosphoric Penta oxide is used (P 2O5).

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

1858/Bag

Page

Zorawar

Prices

35

Products

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

Prices

Calcium Ammonium Nitrate (CAN)

450/Bag

Page

Products

36

Fatima Fertilizer Company Ltd.:

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

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37

both fuel and feed.

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.

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38

Ineffective distribution process.

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.

39

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

Page

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

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

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40

organization.

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

41

Pay and allowances of non management employees.

Page

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

23

24

Page

42

JOB DESCRIPTION:

http://www.careerjet.com.pk/job/2639b323ea9699708429fbfa634117f6.html

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:

43

Managers

Page

Engineers
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 Clients 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.

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44

No threat of forward integration.

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

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45

do not easily get ready to switch.

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:

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46

1. Farmers
2. Land owners

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.

Page

47

Tax relaxation has been offered in order to attract new entrants.

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 dont 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 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).

Page

Legal Trend:

48

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.

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 offseason 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.

26

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

PHOENIX

Page

The oxides of nitrogen cause respiratory diseases like asthma, lung cancer and
bronchitis.

49

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.

 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.

PORTERS 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.
same price because of anti-dumping duty and Government regulations for the

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prices of fertilizer for particular seasons are fixed.

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Production of bio-fertilizer is almost over and imported fertilizer is available at the

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

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Switching costs is low.

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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.
Low advertising campaigns as growers and farmers are not educated and lives in

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villages, so they dont exactly know the balanced use of fertilizer.

52

Fertilizer sector is backward in technology and also lack in resources.

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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.

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Government policies are not consistent regarding fertilizer industry.

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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.

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T7: Government intervenes to stabilize the prices.

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SWOT i matrix
Opportunities

Threats

S1 O1
Strengths

Players financially strong

demand is high expand
capacity

S2 T5
Subsidy by Gop-removal of
subsidy,
S4 T7
heavy demand-Gop stabilizes
the prices,
S5 T1
Agro based economy-scarce
water resource

55

W1 T2
Demand/supply gap-load
shedding of gas
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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Weaknesses

W1 O1 ,
Demand/supply gapdemand is high expand
capacity

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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

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market.

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BIBLIOGRAPHY
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http://www.fadinap.org/NEWSPRJ/newsprj99_3_2.html
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Environment-Principles

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http://www.dawoodhercules.com/reports/annual%20report%2008.pdf
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EXECUTIVE---Fauji-Fertilizer-Company---Karachi/Page1.html

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