VINACHEM

The Ministry of Finance plans to double the duties on imported urea and DAP fertilizer products to 6% from the current 3% in an effort to support sales of locally-made products and ease difficulties of local enterprises.

According to the Vietnam National Chemical Group (Vinachem), fertilizer inventory in the country surged to 685,000 tons in the first four months of this year. Of which, the volume of urea in stock soared a staggering 900% year-on-year to138,000 tons.

Vinachem estimated domestic fertilizer and insecticide output in the January-April period was down 5.8% in volume and 10.6% in revenue.

As the group attributed the increase in fertilizer inventory to rising imports, it called for the ministry to impose higher tariff rates of 7% on urea imports and 8% on DAP.

However, the ministry plans to impose a single tariff rate of 6% on the urea and DAP fertilizer imports based on Vietnam’s commitment to the global trade club WTO. The ministry will announce its final decision after gathering comments from the ministries of trade, agriculture-rural development, and planning-investment, and the Vietnam Farmers Association.

Le Thanh Tung from the Cultivation Department under the agriculture ministry, warned of the possibility of supply surpassing demand which is around 900,000 tons of DAP fertilizer per year. Therefore, he predicted the Ministry of Finance will hike the import tariffs.

Pham Van Quynh, director of the Can Tho Department of Agriculture and Rural Development, told the Daily that the tariff rise plan is a needed policy at the moment as it will help promote consumption of locally-made products despite possible protest from enterprises.

“I think that the enterprises heavily dependent on fertilizer imports would react against the policy but this policy will place a possible impact on the local fertilizer industry,” Quynh said.

Quynh said the duty rise in fertilizer imports will result in higher prices of locally-produced fertilizer products and more pressure on farmers. However, farmers will be able to cut input costs by properly spreading fertilizer on their farms.

Tung noted fertilizer trading firms would take advantage of the tariff increases to push their selling prices to earn more profits and this would hit farmers if this is translated into reality.

Tung proposed administering agencies tighten controls on the prices of fertilizer products on the domestic market if higher import tariffs are applied.

Le Minh Canh, a fertilizer trader in Tien Giang Province, said local producers and trading firms usually peg their selling prices to those imported from China. For instance, if a 50-kilogram bag of Chinese urea fertilizer is sold at VND390,000, the prices of domestic fertilizer products are adjusted to make them the same or a little bit higher.

Therefore, Canh assumed the possibility of local fertilizer prices rising is high if the import tariffs are up.

On January 1 this year, the Ministry of Finance adjusted up the tariff rates from 0% to 3% for imported urea and DAP.

Statistics from the agriculture ministry showed Vietnam spent US$547 million importing 1.73 million tons of fertilizer in the first six months of this year, down 32.1% in value and 13.6% in volume compared to the same period last year.