The fertilizer sector has been characterized by protection, subsidies, and price controls. Although this has helped develop fertilizer markets, inefficiencies in resource use and unsustainable fiscal burdens now mandate a change. In countries where fertilizer use levels are high and the private sector and financial markets are well developed, markets should be liberalized, subsidies removed, and the sector privatized to increase efficiency. Policy and organizational reforms are needed to make fertilizer markets more competitive, including gradual liberalization of trade policies to allow the private sector to compete in the international market. Proper sequencing and phasing of these reforms may pose a challenge because the simultaneous introduction of various policy reforms, including devaluation, subsidy removal, and closure of public sector enterprises, can lead to a drastic reduction in fertilizer use, as happened in Ghana, Poland, Russia, and Zambia.
More research is needed to understand the dynamics of policy and organizational reforms.
Where fertilizer subsidies or crop price support programs have promoted excessive fertilizer use, the removal of subsidies and support measures will lead to the convergence of economic and environmental goals by promoting resource use efficiency, reducing fiscal deficits, and minimizing environmental damage. Although energy consumption is essential for fertilizer production, energy use efficiency must be improved. While a modern plant uses about 30 million Btus per ton of ammonia production, fertilizer plants in many developing and reforming countries use 37 to 61 million Btus. Proper operation and maintenance, revamping of plants, and replacment of old technologies with new energy efficient technologies are essential. The policy challenge over the next few years is to manage environmental problems in high-use areas, without losing the productivity benefits of fertilizer.