About three years ago, Nepal signed an agreement to import 935,000 metric tons of fertilizer from India over five years through the Government-to-Government (G2G) process to avoid the frequent shortages of chemical fertilisers during peak farming seasons.

According to the agreement, Nepal should have imported 515,000 metric tons of fertilizer from India in the past three years. However, as reported by the Agriculture Inputs Company Limited (AICL), the country has imported only 55,000 metric tons of fertilizers. The 5-year agreement, signed on 28 February 2022 between the Ministry of Agriculture and Livestock Development of Nepal and the Ministry of Chemicals and Fertilizers of India, outlines a plan for Nepal to purchase 935,000 metric tons of fertilizer from India through this process.

AICL, which is one of the government bodies responsible for importing the fertilizer, reports that only 30,000 metric tons of urea and 25,000 metric tons of DAP have been imported from India over the past three years. As a result, farmers have been facing an acute shortage of chemical fertilizers annually, especially during the cultivation season.

Under the G2G process, Nepal was expected to receive 100,000 metric tons of urea and 50,000 metric tons of DAP in the fiscal year (FY) 2021/22, 100,000 metric tons of urea and 60,000 metric tons of DAP in FY 2022/23, and 115,000 metric tons of urea and 80,000 metric tons of DAP in FY 2023/24.

By the end of FY 2023/24, 515,000 metric tons of chemical fertilizers should have been imported from India.

For the current year 2024/25, the target is to import an additional 210,000 metric tons of fertilizers, including both urea and DAP. According to the agreement, India is expected to supply 120,000 metric tons of urea and 90,000 metric tons of DAP to Nepal in the year 2025/26. With only two years remaining until the end of the agreement, there are concerns about whether India will meet the total supply commitment.

Bishnu Prasad Pokharel, Managing Director of AICL admitted that the company has not been able to import fertilizer according to the contract. He cited both Nepal's and India's administrative weaknesses as reasons for the delays. Pokharel explained that while the agreement does not require importing all the fertilizers at once, the company has struggled to import the needed quantities on time. The G2G process involves India buying fertilizer from other countries and supplying it to Nepal, which has caused delays in procurement.

He also mentioned that India requires advance payment for the fertilizer, a condition that Nepal has struggled to meet. Initially, Nepal was supposed to pay in advance for 5,000 tons of fertilizer to receive up to 25,000 tons. However, now 100% of the payment must be made in advance, about 5-6 months before the delivery.

The World Bank notes that fertilizer prices began rising right from the beginning of 2020 due to supply chain disruptions caused by the COVID-19 pandemic. The situation worsened in 2021 with the onset of the Russia-Ukraine war, which led to a 300% increase in global fertilizer prices. Despite this, Nepal has faced difficulties importing fertilizers.

Ram Krishna Shrestha, Joint Secretary of the Ministry of Agriculture and Livestock Development, stated that although Nepal remains committed to importing fertilizer through the G2G process, the rising international prices pose a significant challenge. Nepal attempted to import 50,000 tons of fertilizer this year but could not due to the skyrocketing prices. Shrestha pointed out that India purchases fertilizers from the international market for Nepal, making it more expensive than importing through global tenders. He hopes that prices will eventually decrease, making G2G imports more cost-effective.

Government estimates indicate that Nepal's annual demand for chemical fertilizers is about 700,000 metric tons. The Ministry of Agriculture and Livestock Development is currently planning to arrange fertilizers for annual and winter crops. Approximately 120,000 metric tons of fertilizer is required for winter crops such as wheat, potatoes, and mustard.

According to the Ministry, the AICL and Salt Trading Corporation currently hold 190,000 metric tons of chemical fertilizers, including urea and DAP. An additional 88,000 tons are in various stages of import. The ministry claims that there should be no shortage of fertilizers for winter crops.