Previous Page Table of Contents Next Page

Agricultural Inputs and Market Liberalization
by N.S. Parthasarathy

14.1 Background

Considering the heavy dependence of Syrian agriculture on rainfall and the extensive dispersal of cropping areas, timely and convenient availability of inputs is a critical factor for attaining production targets. Agriculture has been a part of the centrally planned economic system with Government organizations and agencies closely involved in all production and distribution activities, including inputs production, import, pricing and distribution. Since the mid-1980s there has been a graduated and cautious shift toward allowing private sector participation and competition in specific areas. Since the mid-1980s, there have been many important policy changes - such as: unification of exchange rates, private sector entry into defined areas of input distribution and agricultural procurement, private sector export of vegetables and fruits, reduced rigidities in crop planning, removal of explicit subsidies and fixation of prices according to production costs. The article assesses the impact of contemporary institutional and policy aspects of input production, importation, pricing and distribution.

14.2 The fertilizer system

a) Fertilizer usage

The popular forms of fertilizers used are ammonium nitrate of both 30 percent and 33 percent grades, urea, triple super phosphate with 46 percent P2O5 (TSP), also commonly referred to in Syria as just super phosphate, sulphate of potash with 50 percent K and, occasionally, diammonium phosphate (DAP) with 18 percent N and 46 percent P2O5. Of these, the first three are locally produced and supplemented by imports to meet the gap between demand and local production. From the following table, it will be seen that N consumption steadily increased from 1988-1989 to 1995-1996 and maintained ground thereafter, whereas P consumption has been declining after the growth trend till 1993-1994. K consumption has been falling after reaching the peak of 9 186 tonnes in 1991-1992.

Table 14.1 Fertilizer consumption - Nutrients - rounded to thousand tonnes
























































Going by the recommended usage dosages of N, P and K for different crops, wheat, barley, cotton, and fruit trees should be the main consumers of fertilizers. However, from figures of loans to different crops it emerges that wheat and cotton account for 90 percent of fertilizer sold on credit.

b) Distribution system

About 60 percent of the total fertilizer requirement is produced locally at the only manufacturing unit located at Homs and the balance is met by imports. The Agricultural Cooperative Bank (ACB) distributes imported and locally produced material to farmers directly and through cooperatives. The ACB is both dispenser of farm loans and distributor of inputs. The quantity of fertilizer and other inputs is pre-determined according to a recommended crop plan (earlier, it was a mandatory plan subject to severe penalties for non-adherence but now made “indicative”) and formalized by the issue of a crop license to every farm at the beginning of each crop year. Farmers, or the cooperatives on their behalf, take delivery from ACB warehouses. Cooperatives’ role in most cases is limited to physical facilitation involving no advance purchase, storage and working capital investment. The 5 361 agricultural cooperatives in the country play an important part in facilitating the redistribution of seeds and fertilizers from ACB to farmer members.

Farmers wishing to purchase fertilizer on cash terms also need crop licenses indicating the quantity of fertilizer they are entitled to. Cash purchases, in such cases, can be made either from the ACB warehouse or from outlets run by agricultural engineers who are registered with the agricultural engineers’ syndicate. Private sector is thus involved in distribution to a limited extent at the retail level to meet demand on cash terms. Retail outlets run by agricultural engineers are registered either with the agriculture engineers’ syndicate or with the Peasant Union (PU) in the governorate. To deal in fertilizer, they have to enter into a contract with the syndicate or the PU whereby, against the syndicate’s/PU’s guarantee, ACB extends credit not exceeding SP300 000 for working capital, and in return for this support these outlets (called joint ventures) pay 40 percent of the profit to the syndicate/PU. Of the total 17 655 agricultural engineers registered with syndicates, about 10 percent have registered for business in agricultural inputs, representing a retail network of approximately 1 700 such outlets for redistribution of vegetable seeds, soluble fertilizers, plant protection products, spraying equipment and micro-irrigation assemblies.

Of the total fertilizer sold, 85 percent is on credit and 45 percent of this percentage represents cooperative member sales - that is, effectively 38 percent of fertilizer redistribution is done by cooperatives. The balance of 62 percent, comprising both credit and cash sales to non-members, is mostly sold direct to farmers by ACB with a small percentage through joint ventures. Thus, ACB is 38 percent wholesaler and 62 percent retailer. This may be one reason why their transaction costs are high.

Field studies suggest the possibility of leaks from the system forming an informal flow of material to the market for sale at higher prices, particularly in busy seasons. In times of planting, especially in zone 1 where pressure of demand builds up with rains, private prices sometimes command premiums of SP800-1 000 per tonne. The restrictive distribution system tends to create these “rents” in fertilizer prices even under conditions of plentiful availability at the macro level.

The foregoing indicates the need for freeing the present restrictive distribution system to allow extensive participation by the private sector in the distribution hierarchy at all levels. This would result in farmers being able to take inputs against credit from the cooperative or joint venture or private outlets, by their choice, against the cropping permit or a credit coupon in its place, and without restriction on the quantity if they wish to buy for cash.

c) Production

The General Fertilizer Company (GFC), located in Homs, is a public sector organization and is the only fertilizer manufacturing unit in Syria. It has an annual installed capacity of 120 000 tonnes of ammonium nitrate, 330 000 tonnes of urea and 450 000 tonnes of triple super phosphate (TSP). The plant is located centrally with good and easy reach to most fertilizer consuming parts of the country. The source of natural gas is about 700 km at Hassake and is piped to the fertilizer unit and the neighbouring refinery. Rock phosphate deposits are also nearby at Palmyrah. Power supply is not a problem and is available at 97 piastres per kWh. The production at this unit has been erratic in relation to the installed capacity as will be seen from the following table. The capacity of the ammonia plant is not matched by capacities in the downstream ammonium nitrate and urea plants, which seems to be the major reason for under-utilization. These plants, as well as the sulphuric acid and phosphoric acid plants, need revamping requiring further investment. Considering the local availability of rock phosphate and natural gas (sulphur is imported from nearby sources) and the inherent comparative advantage for manufacture of nitrogenous and phosphatic fertilizer, it is worthwhile investing in this unit for revamping and de-bottlenecking.

Table 14.2 Production (in tonnes)





2000 Plan

Ammonium Nitrate

74 800

77 466

70 449

108 707

56 000

Capacity utilization %






As % of total supply






90 500

92 150

156 100

189 957

77 000

Capacity utilization %






As % of total supply





Triple Super Phosphate

100 900

197 974

166 015

172 780

150 000

Capacity utilization %






As % of total supply





Total Supply = Production + Imports

With improved production, it is possible either to give farmers the benefit of cost reduction or reduce the budgetary support without affecting farmer price.

Table 14.3 Cost of production - Potential savings per tonne SP

Ammonium Nitrate


Triple Super Phosphate

Cost at 2000 Plan Production

5 966

6 978

9 161

Cost at 90% of capacity

4 557

4 215

7 612


1 409

2 763

1 549

The domestic demand gap at the end of ten years is likely to be about 250 000 tonnes of urea and TSP demand will have been fully met, assuming that these products are produced at 90 percent capacity in the existing Homs unit. The gap is too small to justify installation of additional manufacturing facility for urea solely for local consumption, especially considering that modern ammonia plants have typical capacities of 1 000 - 2 000 tonnes per day, equivalent to 0.5 to 1 million tonnes of urea per year. One option would be to buy urea from world market, considering that it is available at low prices from countries using associated gas as feed-stock. Gas available in Syria could be used for strategically important purposes like power, which may be more difficult to buy from outside. As regards additional capacity for TSP, dependence on sulphur from outside sources and the volatility of DAP and phosphoric acid prices in the international market make selling phosphate rock in its raw material form relatively more attractive.

Removal of current capacity constraints could save about SP595 million annually, which is ultimately a burden on the budget. Higher production would also save annually more than US$50-70 million in foreign exchange.

d) Importation - Role of GEZA

Fertilizer import in its entirety is entrusted to the public sector organization called the Foreign Trade Organization for Import of Chemicals and Foodstuffs - referred to as GEZA, formerly known by the acronym TAFCO. Private sector is not permitted to import fertilizers. Recently, however, a decree has been issued allowing private sector in fertilizer import. GEZA imports through Tartous and Latakia ports - bulk urea cargo mostly through Tartous and bagged cargo through Latakia. Bulk urea is unloaded and bagged by automatic bagging equipment on the wharf and directly loaded onto trucks, saving about US$3 per tonne compared to import in bagged form. The purchase contracts are on C&F free out basis with the responsibility for wharfages resting with the seller. North Africa, East Europe and Russia are the main sources which offer advantages of short voyage time and distributed deliveries in lots of 5 000-7 000 tonnes. There are no constraints of truck availability at either port. Foreign exchange availability for fertilizer import is not a constraint.

GEZA hands over the material to ACB. GEZA is given a small compensation of 1 percent for its effort. GEZA hands over the shipping document to ACB duly endorsed in favour of the latter. As such, GEZA’s role is confined to selection of supply sources, pre-tender evaluation of reliability, inviting tenders, obtaining competitive price and terms, conclusion of contracts and ensuring that the shipping schedule is in conformity with the prescribed program. The dollar cost of imported fertilizer was being converted at discounted rates, thereby passing on a subsidy, till the second half of 1992 at rates varying from SP11.25 per US$ to SP35. The rate of conversion, at the time of this study, was SP46 per US$ compared to the neighbouring country rate that varies from SP46 to SP51 per US$. Fertilizers are exempt from customs duty.

e) Price coordination mechanism

Stocks at different prices are taken over by ACB - local production at cost plus a margin to the producing unit and imported material at varying C&F costs for different parcels plus 1 percent to GE?ZA. Therefore, the Bank has to go through a complex averaging process to arrive at a uniform farmer price for each fertilizer type regardless of the source. These selling prices are recommended and submitted for approval of the Supreme Agricultural Council. The typical margins retained by ACB as set out in their circular dated 7 February 2000 are summarized here.

Table 14.4 ACB margins on fertilizers


Average cost SP/tonne

Sale price SP/tonne

Margin SP/tonne

Margin % on cost

Ammonium Nitrate 30%

5 500

5 400


Minus 2%


7 080

7 700



Triple Super Phosphate

7 630

8 200



Potassium Sulphate

10 940

12 100

1 160


With the entry of the private sector in import and distribution and parallel operation of ACB on the one hand, and the sourcing of fertilizer from both domestic production and imports on the other hand, there is need for a new price coordination mechanism that is free of bureaucratic procedures, preserves competitiveness and moderates large price fluctuations.

In order to meet the changed situation in the post-reform scenario, Government may have to take early action to formulate and publicize a fertilizer policy covering, among other issues, the following aspects: promotion of usage; supply management; availability of foreign exchange for import; pricing and subsidy; utilization of local resources; encouragement of the private sector; including cooperatives; rural credit, extension strategy; support for research, quality standards; and enforcement and environmental protection.

14.3 The seed production and distribution system

a) Seed usage

A notable feature of the seed situation in Syria is the high seed replacement ratio for wheat. Considering that, in respect to self-pollinated crops, farmers ordinarily tend to plant home-saved seeds and do not replace them with fresh processed seeds, the high seed replacement ratio is commendable.

Farmers tend to compare the price they get for a kg of the commercial grain (the output) with the price per kg of seed, although this may not be sound economic reasoning considering the value of the incremental output. This price sensitivity is noticeable particularly in self- and open-pollinated varieties, where the farmer has the option to switch to home-saved seed if he considers the seed price to be high in relation to the crop price. The impact on yield and quality through continuous use of home seed is not often understood.

Table 14.5 Comparison of crop and seed prices


Crop price SP/kg

Seed price SP/kg

Seed price/Crop price

Wheat Soft




Wheat Hard
















The low usage of seed in the case of barley, lentils and chickpea could be due to high seed/crop price ratios. This is exacerbated by the high ratio of seed rate to yield per ha - 18 percent for barley, 8 percent for lentils and 5 percent for chickpea which are not irrigated, compared to an average of 8 percent for wheat.

b) Production

The annual turnover of the public sector General Organization for Seed Multiplication (GOSM) is about SP4 billion. About 12-13 000 tonnes of wheat, barley, lentil and chickpea seeds are exported to Arab countries. GOSM is expected to sell seeds at cost and make no profit.

The private sector role in seed production is in the form of farmer participation in the multiplication activity. Seeds are multiplied through poly-generation method passing from nuclear seed through foundation, registered and certified I stages and finally to certified II seed, which is sold to farmers as commercial seed for raising the crop. The first two stages are multiplied in six stations at different locations directly under the supervision of GOSM, and the remaining two stages are produced on farms by cooperative members and by private farmers. Seed material is supplied to the farmer for multiplication to the succeeding stage at the same price as for the commercial grain, and not at its appropriate cost which naturally would be higher. Farmers raising the registered seed are paid a 25 percent premium over the commercial crop price for the output, and those raising the certified seed I and II are paid a premium of 20 percent. Breeder seed is obtained, free of cost, from the International Center for Agricultural Research in the Dry Areas (ICARDA), research stations and sources outside the country.

The seed rate for different crops and the finalized cropping plan together determine the quantity of seed needed for the ensuing seasons, and form the basis for GOSM’s production plans. The quantity that GOSM can make available, however, is limited by the quantity of seed material available to produce the certified II for use in the immediately following season.

Table 14.6 Seed production - Plan versus execution







Plan - tonnes

210 000

10 000

1 500

1 000

28 000

Execution - tonnes

186 603

2 110

1 044

1 014

39 505

Execution %







Plan - tonnes

160 000

33 000

2 000


32 000

Execution - tonnes

148 533

30 250



33 830

Execution %







Plan - tonnes

190 000

10 000

1 500


32 000

Execution - tonnes

221 274

1 071



29 262

Execution %






Candidate seed from farmers’ fields are cleaned and treated at processing stations under the control of the Ministry of Supply, for which a service charge is paid by GOSM. There are 11 processing stations. The typical capacity is 10 000 tonnes per year although, in actual practice about twice the quantity is processed over six months operating two shifts. The processing units are not responsible for the genetic purity of the material they process. GOSM's technical staff is expected to verify this on seed growers’ fields at the time of planting. Processors do not also take responsibility for guaranteeing the minimum germination, nor do they have laboratory facilities for these tests. The quality of seed produced by GOSM is tested and passed by its own quality control department. The large capacities of the processing plants result in avoidable additional capital cost (estimated at about SP80-90 million each) and consequent higher cost of seed; as the operation is also necessarily of a seasonal nature, under-utilization of capacity is unavoidable. The effect of this is exacerbated by the large over-centralized capacities and consequent high capital cost. Smaller decentralized units seem to be a more practical proposition. Smaller units would also be within the investment capacity of district level entrepreneurs and encourage extensive private sector participation.

At times, wheat and cotton seed availability from the official source is found inadequate during planting. During field visits, several farmers complained of lack of uniformity of species and yields not being up to expectations. Similar quality complaints were voiced in regard to fruit seedlings.

c) Delivery system

Seeds for all strategic crops - wheat, barley, lentils, chickpeas, cotton, and sugar beet - are produced only by GOSM, the public sector organization, for distribution through their branches and through the Agricultural Cooperative Bank warehouses. Hybrid seeds for vegetables are imported and marketed by private sector seed companies through a network of retailers spread across the country.

State nurseries in 70 locations with a combined area of 50 000 dunnums under the control of the Directorate of Agricultural Affairs raise seedlings for fruit trees. The seedlings are distributed to farmers direct and through extension units at nominal prices that reflect a subsidy of about 50 percent (for instance, olive seedlings sold for SP13 against the cost of SP25). The seedlings are sold both for new plantings in reclamation areas in hilly areas and for replacement in old areas.

Government's encouragement of forest tree planting through supply of free seedlings is an important initiative in the seed sector. The Directorate of Forestry has 40 nurseries raising seedlings for free supply to public organizations and at a subsidized price of SP1 per seedling (cost SP15) to the public. Of the total forest area of 461 000 ha, natural forests occupy 232 000 ha and the rest are man-made forest.

Wheat, cotton and potato constitute the bulk of GOSM’s activity and the demand for these crops is steadily on the increase.

Table 14.7 Seed sales by GOSM (tonnes)








26 337

28 236

34 611

36 879

32 536


166 519

17 478

110 000

139 376

148 533


4 129

5 507

4 800

3 500

6 986


36 912

16 581

18 567

27 334

32 771


1 540

1 497

1 557

1 548


There is considerable advantage in permitting GOSM to use the private sector for multiplication and processing based on competitive offers for services. GOSM could supervise field production, sub-contracting processing to the private sector. Contractor-processors could have the option to buy a part of the output for distribution through their own channels.

d) Seed importation by private sector

Importers are required to apply to the Directorate of Agricultural Affairs for approval of the seed variety before seeking an import license. The seeds are tested in the Government’s research stations for two seasons and, depending on the findings, approval is given or refused. The difficulty expressed by importers is that imported seed varieties keep changing rapidly and often when the approval is given after two years it is possible that the same variety may not be available. At the time of import, on arrival of the consignment at the port of entry, the customs take a sample and send it to Aleppo for analysis. The consignment is allowed for clearance after the sample is approved. A local facility for analysis could reduce the delay in clearances of consignments.

e) Seed Law

There is need for a comprehensive Seed Law containing the following: making it illegal to produce, stock or sell seed unless it is an approved variety, packed, sealed, certified and the packing and label comply with disclosure requirements; stipulating procedures for new releases and registration of varieties; specifying quality standards; laying down penalties for deviation; prescribing obligations of seed producers and dealers; specifying disclosure requirements (variety name, producer’s name and address, purity percentages, production date and date of expiry for viability) and similar aspects.

f) Pricing

Pricing for barley, lentil and chickpea seeds need review to recognize the uncertainties of rain-fed conditions under which these crops are raised and to encourage a higher seed replacement ratio. There are also reports of seed growers’ considering the premium of 20 percent over the commercial price for seed crops to be insufficient. As a result, they tend to divert the seed crop to the market instead of giving it to the processor. This interrupts the multiplication chain. To avoid diversion and to ensure continuity of the seed chain, the premium may have to be reviewed.

Presently, the Government fixes the maximum prices of imported seeds. This could be modified into a system of requiring the importer to file the cost of import and marketing, waiving the price fixation part of the procedure and allowing him to fix his own pricing. The market could be allowed to determine what price each variety deserves. The cost data filed by importer should be adequate for identifying undue price increases and corrective action.

14.4 Plant protection products

a) Usage

The usage of plant protection products is under two sectors - the public system for control of pests on a community scale where Government takes responsibility to protect crops against migratory pests and, second, private sector marketing of products where responsibility for protection rests with individual farmers. About 60 percent of the chemicals imported and distributed by the Government are herbicides, especially for wheat. The private sector market for plant protection products has been registering a steady growth, resulting in a reversal of shares between the two sectors from 1987. Although figures for the last two years are unavailable, experts in the industry estimate that demand in the private sector market has been growing at 15-25 percent per year.

The usage of plant protection products is summarized in the following table. The figures are in SP converted from US$ cost of imports, and for purpose of comparability, the same rate of conversion has been used over all the years although, in actual fact, the conversion rates in earlier years were lower than the market rate treating farm chemicals as a priority item.

Table 14.8 Plant protection products distribution (SP million)


















1 113












1 124







1 013


1 673

1 969

1 745



NA: not available.

b) Distribution

Private-sector distribution is well-defined and there is a smooth flow of material from the importer through the dealer network to farmers. Broadly, public imports cover the strategic crops - wheat barley, lentils, chickpea, cotton and sugar beet - and the private sector covers the non-strategic crops. In respect of private sector operation, apart from fixing prices, Government allows a free hand to distributors, retaining responsibility for demand estimation, registration, licensing and quality enforcement.

A typical private organization maintains three warehouses located at logistically convenient centres such as Tartous, Homs and Aleppo for supply to dealers who number 200-300 according to the volume distributed by the organization. Supplies from warehouses reach dealers within a day or two of the order placement. Dealers are given discounts based on volume of purchase and prevailing competition. In special cases, credit is given to dealers depending on their purchase volumes and track record of honouring commitments. Technical sales staff of the marketing organization call on dealers regularly to check their stocks and to book fresh orders for replenishment. Under current regulations, any dealer selling farm requisites is required to employ an agricultural engineer who is registered with the agricultural engineers’ syndicate.

Marketing organizations also import and distribute a wide range of farm requisites such as vegetable seeds, soluble fertilizers, green houses and micro-irrigation equipment.

Hormones, attractants and trap devices are distributed by the Government, free of cost, through extension units. The cost of control of migratory pests is not recovered from farmers. Aerial spraying for wheat is recovered at half a piastre per kg of the produce. Distribution under special programs is also carried out through the Agricultural Cooperative Bank (ACB) network.

c) Importation

The estimated demand for the year as approved by the Committee for Pesticide Supply Management in the Ministry of Plant Protection, after adjusting for stocks on hand, is scheduled for shipment and given to GEZA. GEZA calls for tenders and enters into contracts for shipments.

Imports by the private sector are generally from Western Europe and the USA. Under resolution 15T of 1996, imports are permitted only from those organizations that manufacture the chemical, and not from formulators. The procedure for registration is spelt out under Law 34 of 1997 and requires that every chemical imported for use in the country be registered with the Directorate of Plant Protection. Chemicals eligible for registration should be in use in the country of origin, failing which in at least two developing countries, which have environmental and biological regulations. The chemicals should not contain any ingredient harmful to the environment. The registration and approval of any new chemical takes two to three years to undergo all the tests in the Government laboratory.

Imported material is allowed to be sold only in the original packing and is not permitted for local re-packing. Once a chemical is registered, the procedure for obtaining the import license is fairly speedy. A blanket license can be obtained for the whole year to obviate the need for applying for import of each consignment.

There could be a considerable reduction of cost by importing in bulk and re-packing locally, since handling costs in exporting countries are much higher than under Syrian conditions. Further cost reductions could be achieved if private parties were to be encouraged to import the technical ingredient and formulate it in to various forms and concentrations.

d) Pricing

Importing companies furnish details of their costs based upon which maximum selling prices are fixed by the Government. Since the base costs as furnished by the importing companies are not audited, nor is it worthwhile to do so, it is possible that real margins are higher than what is officially allowed in price fixation. This is supported by market observations of products being sold even lesser than approved prices. Official prices have little significance unless they are made known to buyers. With a wide range of varieties and packing, it is impractical to make farmers aware of them.

In the circumstances, the present practice of fixing and approving maximum selling prices could be withdrawn requiring importers/marketers to file (not for approval) with the Directorate of Plant Protection, not the Ministry of Supply as at present, the cost of each consignment. This information should be sufficient basis for monitoring market prices.

14.5 The inputs policy components

a) Pricing system for inputs

Pricing norms and the agencies involved in the pricing process for fertilizers, seeds for strategic crops, vegetable seeds and plant protection products are summarized in the following tabulation. The Government fixes prices for all inputs based on production or procurement cost.

Table 14.9 Institutions intervening in the price setting for inputs

Fertilizer Local Production

Fertilizers - Imported

Seed GOSM Production

Seed Marketed by Private Sector

Plant Protection by Private Sector

Initiated by:

GECM with cost of production

GEZA with landed cost

GOSM with cost of production

Company with landed cost

Company with landed cost

Submitted to and scrutinized by:

Special Committee of reps of GECM General Peasant Union and ACB

Ad hoc Committee of reps of Ministries of Agriculture, Industry, Economics, Foreign Trade, Supply

Special Committee of representatives of Agriculture, Supply and Peasant Union

Ministry of Supply and Internal Trade

Ministry of Supply and Internal Trade

Approved by:

Through Minister for Agriculture to the Supreme Agricultural Council1

Same ad hoc Committee

Through Minister of Agriculture to Supreme Agricultural Council

Ministry of Supply and Internal Trade

Ministry of Supply and Internal Trade


Not more than 10% on cost of production

1% on landed cost

At cost of production

Landed cost is on average 1.33 times CIF cost -CIF cost + 15% to wholesaler + 15% to retailer - That is, 1.33 × 1.15 × 1.15 = 1.76 times CIF cost (app.)

24% on landed cost to wholesaler and 10% thereon to retailer

1By late 2001, the functions of the Supreme Agriculture Council (SAC) were transferred to the respective Ministries. As a result, under the new arrangement, the Cabinet, presided over by the Prime Minister, adopts/approves the proposals of the concerned sectoral Ministries. The consultative process, through the formal representation of political and social bodies in the SAC, is now replaced by consultations with stakeholders, at various levels, by the concerned Ministries.

b) Credit

b1) Working capital

Credit is needed to support the following functions in the input distribution system. (a) Credit for retailers to purchase inputs and stock them ahead of the season - known as retail credit and © finance for large volumes of purchase by wholesalers and country-wide distributors in advance of the season - referred to as distribution credit.

Most retailers support the business through their own cash, and borrowing from friends and relatives as they find bank borrowing cumbersome. The maximum credit limit eligibility for retail business is SP250 000, but more often the actual sanction is only about SP125 000. A major source of financing is supply on credit from the distributor. However, as distributors are themselves under pressure, the facility they can give to their dealers is restricted. Discount for cash purchase is fixed as high as 2-3 percent per month, reflecting the cost of capital in the informal money market and the severe working capital pressure in the system. Credit for inputs is extended in kind according to the limits in the crop license. About 85 percent of fertilizer sales are on credit and the balance for cash.

Paucity of working capital, stringent eligibility norms and procedural complexities are perceived as serious handicaps to private sector initiatives to enter into new areas of activity, or for expansion of existing ones.

b2) Role of Agricultural Cooperative Bank

Substantial improvement in farmers’ capacity to hold the produce is to be promoted through micro-level institutions with stores and refinance facilities to advance monies against the grain deposited. These are the kind of development lending and support activities that ACB, Banking Division, should look at for future expansion. ACB should get out of retail lending and move more into wholesaling of credit, operating through micro-finance institutions which have closer contacts with farmers and, therefore, more effective in enforcing repayments.

c) Quality control

No major complaints were heard from farmers regarding quality of fertilizers. Poor quality and non-effectiveness of agricultural chemicals were, however, raised at some of these meetings, though such complaints were not many. Importers and distributors of plant protection products of good standing (and formulators of veterinary products) consider proper quality enforcement in the field to be very important. Weakness on this aspect leads to sale of spurious material, wide price differences between genuine and spurious materials causing confusion in farmers’ minds, erosion of confidence in use of plant protection methods and severe disadvantage to genuine operators.

Responsibility for quality enforcement is vested with the sub-directorate of plant protection at the governorate, and the staff has powers to freeze stocks and close sale, if the sample analyzed at the Central Pesticide Laboratory, Duma, showed quality deviation. Quality tests by governorates seems generally confined to verifying the expiry date. No data was available on the number of inspections made, deviations noticed and deterrent action taken on such cases.

Individual stamping of thousands of small packages of plant protection products seems more aimed at checking smuggling than at quality control. If local re-packing of imported bulk material and import of technical ingredients for local formulation are permitted, in stages, with powers and facilities to Government to verify quality on the production floor and audit formulators’ laboratory facilities, the objectives of discouraging smuggling and enhanced quality assurance would be better served. Prices also are likely to reduce substantially, as it is very expensive to import small packages.

Central laboratory facilities for seed quality testing are with GOSM at Aleppo. In a future situation of permitting private sector participation in seed production and marketing, this laboratory should be made independent of the public sector producer. The functions of field inspection for genetic purity and germination standards, and of cleaning and treating the seed are bifurcated between GOSM and the Ministry of Supply. Although GOSM have internal minimum standards for each variety regarding genetic purity, germination and maximum limits for moisture and inert material, these should be declared on the packing and made known to the user. There should not only be enforcement, but this should be seen by farmers to be happening to increase their confidence in the system and strengthen quality awareness among producers. A seed law is necessary which embodies these provisions, prescribes packaging standards and minimum disclosure requirements, identifies enforcement authorities and stipulates penalties for violation.

Similarly, for fertilizers and agricultural chemicals, quality standard laws are also needed, especially in the context of the Government recently permitting the private sector to import and market fertilizers. Existing legislation covering fertilizer is inadequate. It should be replaced by a new fertilizer law covering the following aspects: to stipulate quality standards for different fertilizer types; prescribe testing procedures and tolerance limits for deviation; nominate enforcement authorities; make it obligatory for anyone wishing to manufacture or import or sell or offer to sell fertilizer to seek registration with the nominated authority; prescribe as a condition of registration the obligation to furnish information as required on stocks, arrivals and prices; make it also obligatory to display at the premises the stock and prices and stipulate that in every sale a bill of sale bearing the name and land identity of the buying farmer is issued.

d) Implicit taxes and subsidies

The study has estimated the amount of subsidy/tax at various levels and the details are summarized in the following table.

Table 14.10 Implicit taxes and subsidies on inputs (SP million)


Implicit Tax on Farmer

Implicit Subsidy to Farmer

Implicit Subsidy to Organization

Net Position

Seed Production


2 398


2 398

Fertilizer Production & Imports




1 390

Fertilizer Distribution







3 193

1 061

4 223

Implicit subsidy in respect of fertilizer production and imports reflects the extra cost over the border price. The tax on fertilizer distribution represents the extent to which sub-optimal efficiency in the system is passed on to the farmer. Implicit subsidies are the un-recovered part of legitimate cost of production/services and, for policy reasons, not charged to the farmer. Implicit subsidies to the organizations represent the cost of sub-optimal efficiency, which is not recovered in price affecting the company’s financial health, and which is eventually absorbed by the state budget one way or the other.

Without higher production efficiency at Homs, a subsidy would further increase from SP795 million to SP830 million in 2004 on a higher volume - the increase is moderated by the fact that higher proportion of demand is met by cheaper imports.

e) Other related issues

e1) Multiplicity of institutions

Currently, a multiplicity of government organizations is involved in coordinating the production and marketing of various inputs, without responsibility resting with a single nodal entity. In place of this, it would be advantageous to vest control of each major input with one Directorate. The Planning & Statistics or Land Directorate could be entrusted with fertilizers, Plant Protection Directorate with plant protection products and Agricultural Affairs with seeds. Private sector operators also would find this single window system convenient and time-saving for getting all policy clarifications and clearances and for being accountable on supply management, quality guarantee, fair trade practices and price maintenance.

e2) Extension

Workload on extension staff is quite high considering the facilities available to them in terms of vehicles, petrol allowance, promotion aids, motivation and incentives for good performance. They play a very vital frontline role in the country’s agriculture. Government extension efforts are functioning in a separate compartment without involving the private sector. Having opened the market for plant protection products, there is hardly any dialogue between the Government and private sector in coordinating development activities, demand-supply planning and other issues. Experience in other countries is that close involvement of private sector in supporting and participating in Government’s extension programs through manpower and materials has yielded good results besides presenting a unified message to the farmer, and making the private sector develop a sense of social responsibility.

14.6 Input policies in relation to agricultural growth and sector policy

a) Positive aspects of inputs policy

The positive results of the input policy are as follows: (i) inputs availability to farmers without major interruptions; (ii) timely demand estimation to ensure macro availability; (iii) imports at reasonably competitive rates; (iv) availability of foreign exchange for all inputs without difficulty; (v) private sector participation in plant protection product import and marketing successfully launched; (vi) high replacement ratio for improved seeds of wheat; and (vii) credit availability for inputs.

b) Input and agricultural productivity

Syrian agriculture has responded well over the years to rapidly increasing population, over 3 percent annually till the 1980s close to that number thereafter, by providing adequate supply of calories. Irrigated wheat production increased from 1.2 million tonnes in 1991 to 2.5 million tonnes in 1998, ignoring the steep fall in 1999 because of acute drought conditions - an increase of 101 percent. Similarly, wheat, barley, lentils and chickpeas, the principal food items, registered increases over the same period of 46 percent, 67 percent (but in 1996 after which there has been a decline), 213 percent and 216 percent respectively, presenting, on the whole, a good overall production performance. During the same period, plant nutrient consumption increased by 19 percent from 303 294 tonnes to 361 363 tonnes.

Figures of loans classified by crops in table 128 of the Annual Agricultural Abstract 1999 shows that 71 percent of the kind loans went to wheat and 19 percent for cotton. All other crops took up the remaining 10 percent of loan issues. This is indicative of a narrow consumption base for fertilizer, considering the rich variety of crops in the country.

c) Institutional performance

Public organizations have been made autonomous and as such they are required to operate within budget discipline and find their own resources for operations and productive investment, the latter with the approval of the State Planning Commission. There are no problems when institutions are making profits and cash surpluses. Those working below norms may be faced with either of two situations. One, they are making losses and so run out of cash. Two, they are making even good book profits but, paradoxically, suffer acute cash shortages due to poor working capital management reflected in heavy stocks and/or large receivables. As regards the first category the Government, which is still the deciding authority on pricing issues ensures that a cost plus margin is allowed so that losses are avoided. This, in effect, could and does lead to inefficiencies in the system being underwritten at the cost of the farmer, or where it is not covered by price, from the budget. Deliberate policy decisions taken by the Government to pass on benefits to farmers are rightly compensated from the budget. Cases of cash shortages caused by poor working capital management have to be met by these institutions either through commercial bank borrowings or through assistance from the Public Debt Fund, with the approval of the Ministry of Finance. In either case, so long as the lending is from one public lending resource or institution to another public institution, it casts indirectly a burden on the exchequer. Autonomy, zero budgeting and introduction of the concept of Management by Objectives are excellent first steps already taken by the Government, which have to be followed up by letting the institutions seek a market price - and not an administratively fixed cost plus price - and operate under pressure of competition to raise the level of excellence.

d) Likely effects of reform of the input sector

A smooth change-over to a competitive system without abandoning the useful parts of the existing structure could still leave the public and cooperative sectors to operate cost-effectively, competing with the private sector and balancing the deficiencies of the latter. The competitive environment emerging from these reforms is likely to result in better service at less cost, very much to the benefit of the farming community. Implicit subsidies could be reduced without unduly high price increases in farmer prices through elimination of system inefficiencies and thereby release these resources for investment in agriculture-related infrastructure. Potential for increased private sector investment in the input production and distributive sectors could liberate public resources for investment in larger measure on critical needs, such as research and extension. Above all, the creation of a conducive environment for private sector participation in the production, importation and distribution of inputs and related farm services could not only harness private sector resources and managerial energy but create many new off-farm income generation opportunities in the rural areas.

Previous Page Top of Page Next Page