Fertiliser subsidies not helping Vietnamese farmers

Input material subsidies for fertiliser production aims to support farmers, but facts have shown that farmers cannot buy fertiliser products at low prices while only producers and intermediaries benefit from the policy.

Nguyen Dinh Hac Thuy, vice chairman and general secretary of the Fertiliser Association of Viet Nam warned that uncertain policies of price subsidisation were responsible for the recent hot and cold fluctuations in the market.

He explained that the State was still subsidising the most important input materials for fertiliser production including gas and coal, while also applying preferential taxes on domestic fertiliser enterprises, which distorted prices.

Although fertiliser enterprises only had to buy gas at a price equal to 50 per cent of the market price, the price of fertilisers sold to peasants were still at high levels, Thuy said.

Nguyen Tien Thoa, director of the Ministry of Finance's Price Management Department, told the Tien Phong (Vanguard) newspaper, that if the subsidisation mechanism had not been applied, the prices of coal for producing fertiliser would have increased by between 21 to 82 per cent.

Accordingly, the prices of fertiliser products must be raised by between 20 and 24.25 per cent, he said.

Thoa added that the subsidy had distorted the fertilizer market, creating unhealthy competition among fertiliser makers and causing importers difficulties in doing business.

Thuy agreed, saying that there was a time when prices of domestically-made fertiliser products were 10 to 15 per cent lower than market price; but they only met a maximum 40 per cent of demand. However, importers could not import fertilisers to meet the remaining demand, as the more they imported, the more they lost.

Nguyen Tien Dung, general director of the Agricultural Products and Materials JSC (APROMACO), said the production cost of urea fertiliser was VND4.5 million (US$214) per tonne, while the import price of the same kind of fertiliser was $450 per tonne, equal to more than VND10 million ($476) per tonne.

The gap between the domestic production cost and the import price was too big, it meant that only domestic producers and intermediaries could profit, he said.

He said that if the subsidy mechanism was removed, domestic fertiliser companies would still be able to produce fertilisers and sell them at prices better than those imported as import prices including transport and insurance costs were often higher.

Dung suggested that the State support farmers through raising the purchase price for their produce instead of subsidising input materials of fertiliser production.