An exploration of fertilizer supply chain in BADC

Abstract

1. Chemical fertilizer was introduced in Bangladesh in the late 1950s and the fertilizer policy consisted of one basic tenet-complete public sector control over its procurement and distribution. This policy continued throughout the 1960s but since the War of Liberation the policy regime has undergone fundamental changes. 2. Bangladesh Agricultural Development Corporation (BADC) was established in 1961. Since inception BADC supplies fertilizer to farmer. The responsibility of procuring fertilizer from both domestic and external sources and distributing to the level of a small administrative unit (thana) rested solely with BADC. 3. There was a significant shift in policy on fertilizer distribution at the wholesale and retail levels during late 1970s. Finally, privatization of fertilizer trade was implemented supported by a policy of price deregulation in the early eighties which empowered the traders to sell at any price they could fetch in the market. 4. The government excluded fertilizers from the list of import restricted and allowed private sector to import fertilizer. The subsidy on fertilizers was withdrawn completely in December 1992 and importation and distribution of fertilizer made open. 5. Fertilizer distribution network is composed of appointed/licensed dealers who are expected to observe limitation, including selling only within designated areas. Government provides a supervisory role on the trade which also sets an indicative price level for traders to abide-by. Farmers collect fertilizers from three different sources: BCIC appointed fertilizer dealers and their representative (sub-dealer) shops, BADC dealers shops and local fertilizer retailer’s shops. 6. The economic reasoning for providing fertilizer subsidy lies that it encourages farmers to produce more (food grain). Government of Bangladesh may opt for a selective, targeted subsidy scheme in place of the universal coverage of subsidy that is being practiced now. 7. Total fertilizer demand or requirement from household level is considerably higher than the corresponding official estimates. There is a tendency for fertilizer to be smuggled in or out depending on the comparative prices of fertilizers on both sides of the border.