Pakistan’s urea market has recorded a sharp contraction, with sales falling to a 24-quarter low of 1.04 million tons in the first quarter of calendar year 2026 (1QCY26). This dramatic decline marks the lowest sales volume in six years, raising serious concerns about the agricultural sector’s health and food security outlook for the nation.
Understanding the Urea Sales Decline
The fertilizer industry, particularly the urea segment, serves as the backbone of Pakistan’s agricultural productivity. Urea provides essential nitrogen for crop growth, and its availability directly impacts wheat, rice, and cotton yields across the country. The current sales slump indicates deeper structural issues affecting farmers’ ability to access or afford critical agricultural inputs.
Industry analysts at AKD Research have documented this contraction as one of the most severe downturns in the sector’s recent history. The decline to 1.04 million tons represents not just a cyclical decrease but signals fundamental challenges in the agricultural value chain.
Factors Behind the Low Khad Crisis
Several interconnected factors have contributed to the current fertilizer market crisis:
- High Fertilizer Prices: Rising production and distribution costs have made urea increasingly unaffordable for small and medium-scale farmers
- Credit Constraints: Limited access to formal financing has restricted farmers’ purchasing power during critical planting seasons
- Water Availability Issues: Uncertain irrigation patterns have led some farmers to reduce cultivated area
- Subsidy Inefficiencies: Government subsidy programs have struggled to reach end-users effectively
- Import Dependency: Domestic production gaps have increased reliance on expensive imported urea
Impact on Agricultural Output
The Fertiliser Review Committee has expressed grave concerns about the supply-and-demand imbalance. With farmers reducing input usage due to cost pressures, crop yields are expected to decline significantly in the upcoming harvest seasons.
Agricultural economists warn that reduced fertilizer application typically leads to lower per-acre productivity. When farmers cannot afford optimal nutrient levels for their crops, the entire food production chain suffers consequences that eventually reach consumers through higher food prices.
Government Response and Policy Measures
The government has convened the Fertiliser Review Committee to address the crisis situation. Key discussions have focused on:
- Ensuring adequate urea supply for the Rabi season requirements
- Reviewing existing subsidy mechanisms for better targeting
- Exploring alternative fertilizer sources and suppliers
- Coordinating with provincial agriculture departments for last-mile delivery
FFC (Fauji Fertilizer Company) and EFERT (Engro Fertilizers) have been identified as key players expected to lead the sector’s recovery, with projections of 5% year-on-year earnings growth in 1QCY26 despite the challenging environment.
Future Outlook
The trajectory of Pakistan’s fertilizer sector will significantly influence agricultural productivity and, consequently, food inflation in the coming months. Without meaningful intervention, the current low-khad trend could translate into higher commodity prices and increased reliance on food imports.
Industry stakeholders are calling for comprehensive policy reforms that address both short-term supply gaps and long-term sustainability of the fertilizer distribution system. The government faces the delicate balancing act of supporting farmers while managing fiscal pressures on subsidy budgets.
Frequently Asked Questions
What does “low Khad” mean in Pakistan?
“Khad” is the Urdu word for fertilizer, particularly nitrogen-based fertilizers like urea. “Low Khad” refers to the current situation where fertilizer sales and consumption have significantly declined, indicating farmers are using less agricultural inputs.
Why are urea sales at a 24-quarter low?
Urea sales have fallen to 1.04 million tons in Q1 2026 due to high prices, limited credit access for farmers, water availability concerns, and inefficiencies in subsidy distribution mechanisms.
How does low fertilizer usage affect food prices?
When farmers cannot afford sufficient fertilizer, crop yields decrease per acre. Lower agricultural output leads to reduced supply in markets, which ultimately results in higher food prices for consumers.
Which companies lead Pakistan’s fertilizer sector?
FFC (Fauji Fertilizer Company) and EFERT (Engro Fertilizers) are the two major players dominating Pakistan’s fertilizer market, together accounting for the majority of urea production and distribution.
What is the government doing about the fertilizer crisis?
The Fertiliser Review Committee is actively monitoring the situation and exploring measures including subsidy restructuring, import arrangements, and improved distribution networks to ensure adequate farmer access.
How might this impact tax revenue?
Lower agricultural productivity can affect multiple sectors of the economy. For tax-related insights on how agricultural challenges ripple through the economy, explore our comprehensive Budget 2026-27 coverage.
Stay updated with the latest tax and economic developments by visiting AllPKTaxes.com.