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March 08, 2011

Kenya fertilizer subsidy scheme gets boost

by Zeddy Sambu

The Kenyan government has set aside Sh4.3 billion to buy fertiliser for small-scale farmers in a move meant to revive a subsidy scheme.

The consignment of top dressers and planting fertilisers will be shipped in by private companies and distributed through the National Cereals and Produce Board, according to Agriculture permanent secretary Romano Kiome.

The international tender announced in late February will include 23,000 tonnes of di-ammonium phosphate (DAP) variety that is mainly used during planting. The consignment also includes 15,000 tonnes of calcium ammonium nitrate (CAN) as well as 5,000 tonnes each of Urea and NPK which are used as dressers for coffee and tea bushes.

Dr Kiome said there were sufficient stocks for the current planting season in the food basket region of the Rift Valley, but additional imports were necessary. "We are importing because we have the money. The import is part of the fertiliser subsidy programme," he said.

He spoke as private sector players who have a stranglehold of the market alleged a ploy to distort market prices.

"If they import and sell to large scale farmers who are our customers, then it breeds unhealthy competition," said Mr Eustace Muriuki, the general manager at Mea Kenya Ltd and the national chairman of the Fertiliser Association of Kenya.

The imports coincide with parallel ones by the Kenya Tea Development Agency (KTDA) on behalf of the more than half a million small scale tea farmers.  KTDA was set to pre qualify importers for the supply of 60,000 metric tonnes of NPK fertiliser.

The government has, over the past year, tripled its share of fertiliser imports in the private sector-dominated market to 22 per cent, up from eight per cent. Kenya relies heavily on imported fertiliser to meet local demand of approximately half a million tonnes of assorted fertilisers.

Policy analysts say farmers can only benefit from collaboration between the private and public sector as opposed to subsidies that may not be sustainable.

A significant decline in prices, they say, will come through tax rebates on fertilisers manufactured locally.

EAC member states have submitted a proposal to the African Development Bank for a feasibility study for regional fertiliser production.

The government recently withdrew a fertiliser subsidy scheme intended to cushion farmers against the global surge in prices. Withdrawal of the scheme at a time when international prices were falling has denied farmers the benefits of economies of scale from bulk purchases.

Diammonium phosphate is currently selling at Sh3,600 per bag in growing areas, while top dresser calcium ammonium nitrate is retailing at Sh1,600 per bag.

Port and handling charges account for $65 (Sh5,100) per tonne, before distributors add their margins.

In recent weeks, the price of standard crude oil, a major component in fertiliser making, has risen to $108 per barrel on the back of the turmoil in the Arab world.

Agriculture policy experts want the government to give out incentives to encourage local entrepreneurs to venture into the distribution of the commodity on a long term basis, levelling distortions in the market.

Cereal production consumes the bulk of fertilisers (150,000 tonnes) followed by horticulture (65,000 tonnes).
Coffee and tea take up 40,000 and 30,000 tonnes respectively, while the remainder is taken up by other crops.

Farmers mainly use diammonium phosphate (160,000 tonnes), NPK and single super phosphate (10,000 tonnes).

Top dressers used include calcium ammonium nitrate (CAN) 80,000 tonnes and Urea 50,000 tonnes.

Norwegian firm Yara International commands 50 per cent of the fertiliser market share followed by Mea Kenya at 35 per cent. The sub sector was liberalised in 1991.

 Business Daily Africa

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