In an attempt to overcome a shortage in the supply of fertilisers in the local market, the government last week decided to impose a LE400 levy on every tonne of exported fertiliser. The move stemmed from a perceived shortage in the local supply of fertilisers, a problem that has been negatively affecting cultivation and agricultural productivity. Mounir Fakhri Abdel-Nour, the minister of industry, said that the decision had been taken in response to complaints from farmers that fertilisers were not available in the local market during the agricultural season. The problem is not scarce local production, however, as this comes in at some 20 million tonnes annually, more than enough to cover the local demand of 12 million tonnes if private-sector companies did not export so much of their production. The state-owned fertiliser companies cover nine million tonnes of local needs, but the private sector should provide the balance according to a “gentleman's agreement” between the government and the private sector, the minister said. According to a deal of this sort, each factory would deliver an annual quota of fertiliser to the Ministry of Agriculture, and this would then be distributed across the country to cover farmers' needs. The newly introduced export tax will only be imposed on companies that fail to deliver the agreed-upon quotas, the minister indicated. The government warned the fertiliser companies some months ago that it would intervene to impose an export tax if they refused to deliver such quotas. The problem of the shortage of fertilisers has recently escalated because some traders have been buying up large supplies and then selling them on the black market at inflated prices. Ashraf Abbas, a professor of agricultural economics at the Agricultural Research Centre in Cairo, told Al-Ahram Weekly that the lack of expansion at the fertiliser factories and their failure to increase production capacity had been behind the shortages. Adel Fadel, deputy chairman of the Egyptian Association for Fertilisers, Commercial Traders and Distributors, said that the problem lay in the fact that the production lines at state-owned factories were in urgent need of renovation. Once this had been done, he said, the shortages could be covered by increasing the production capacity of the public-sector companies. A more practical alternative to the new tax, according to Fadel, would have been to issue legislation obliging the private sector to direct 25 per cent of its production to the local market. “In this case, each factory would have worked hard to increase its productivity to cover the local as well as the export needs,” he said. Abbas acknowledged that a LE400 export tax on a tonne of fertiliser was high, but said that it would oblige the companies to deliver the amounts needed for the local market. However, Fadel said that the government was trying to solve the shortages problem by creating an even larger one. “Taking such sudden moves gives a bad image to the investment climate, as investors need stability and clear economic policies in order to want to invest in Egypt,” he said. The Export Council for Chemical Products also expressed its reservations about the move, saying that it would have a negative impact on fertiliser exports, increasing their prices and reducing their competitiveness. This was particularly true when competing with other countries such as Algeria, the council said, which had abundant natural gas and could therefore produce fertilisers more cheaply than Egypt. The private fertiliser companies have rejected accusations that they are behind the problem of shortages, saying that this in fact stems from officials' inability to determine the needed quantities early enough to give the companies a chance to deliver them. They have also suggested that the government build larger storage silos in order to help end the fertiliser black market.
