Five factors determine the direction of chemical fertilizer market reform

Recently, there have been voices in the industry to delay the market-oriented reform of chemical fertilizer, on the grounds that the price of chemical fertilizer has fallen sharply, and now many chemical fertilizer enterprises are having difficulties in operation. if preferential policies are cancelled, the survival of some enterprises will be even more difficult, and some may even close down.

The market-oriented reform of chemical fertilizer is the general trend. In July 2005, the National Development and Reform Commission issued the "Reform and improvement of Chemical Fertilizer Price Control Mechanism (draft)", which clearly put forward that we should adhere to the orientation of market-oriented reform. However, due to the influence of many factors, the progress of chemical fertilizer marketization is still not satisfactory. At present, the chemical fertilizer industry also enjoys many preferential policies, such as electricity price discount, natural gas price discount, value-added tax discount, railway freight discount and so on.

Recently, there have been voices in the industry to delay the market-oriented reform of chemical fertilizer, on the grounds that the price of chemical fertilizer has fallen sharply, and now many chemical fertilizer enterprises are having difficulties in operation. if preferential policies are cancelled, the survival of some enterprises will be even more difficult, and some may even close down.

In this regard, the author believes that we should adhere to the market-oriented reform of chemical fertilizer during the 13th five-year Plan period. From the analysis of the current internal and external environment of the chemical fertilizer industry, five major factors determine that the pace of chemical fertilizer market reform should be accelerated rather than slowed down.

First, the impact of the overall environment. In recent years, one of the biggest characteristics of China's economic work is to streamline administration and delegate power, to seek benefits from the market, to hand over to the market what can form a price by the market, and to let the invisible hand of the market give full play to its role without improper intervention by the government.

The second is to promote the healthy development of the industry. At present, the overcapacity of nitrogen fertilizer and phosphate fertilizer in China is very serious, which has become the main reason for the market malaise. It is necessary to eliminate the backward production capacity in order to promote the healthy development of the chemical fertilizer industry. Otherwise, not only the damned enterprises will not die, but the enterprises that deserve to live will not live well. Some chemical fertilizer enterprises have outdated equipment, backward technology, high energy consumption and high pollution, which should have been eliminated a long time ago, but they are still struggling due to the support of preferential policies.

Third, the policy background has changed. In the past, the scale of China's chemical fertilizer industry was small, and its output could not meet the domestic demand, so it needed to be imported in large quantities from abroad. In order to ensure the demand of domestic agricultural production, the state has given many preferential policies to the chemical fertilizer industry to support the development of the chemical fertilizer industry and increase output. However, with the great development over the years, the annual output of chemical fertilizer in China has reached 70 million tons, which can not only effectively meet domestic demand, but also need to be exported to the international market to digest excess capacity. If preferential policies continue to encourage production, the contradiction of overcapacity in the chemical fertilizer industry will become more and more prominent.

Fourth, preferential policies cause imbalance within the industry. Those who enjoy more preferential policies are mainly some old chemical fertilizer enterprises in the past, while the new chemical fertilizer enterprises enjoy much less preferential policies, which forms an imbalance in the chemical fertilizer industry. New enterprises have advanced technology and should have an advantage in the competition, but due to different preferential policies, they may not necessarily compete with old enterprises that have "policy advantages" although they do not have technological advantages.

Fifth, the timing for the marketization of chemical fertilizers is better. In our country, difficult reforms are often carried out when the price is lower, which can reduce a lot of resistance. This is the case with the fuel tax reform in 2008. Oil reform is regarded as the most difficult bone. Government departments have long had the idea of fuel tax reform, but it has not been implemented because of high international oil prices. Later, seizing the opportunity of the sharp fall in international oil prices in the second half of 2008, the state timely launched the fuel tax reform and established a new oil price formation mechanism dominated by market-oriented means, which took many years to achieve positive results. The same was true of last year's coal resources tax reform, which failed to implement the proposal for years and was launched in September last year, seizing the opportunity of a sharp drop in coal prices. Now the market-oriented reform of chemical fertilizer is also faced with such opportunities, international and domestic fertilizer prices are very low, the resistance to market-oriented reform is very small. Even after the market-oriented reform, the appropriate increase in the price of chemical fertilizer is much lower than the previous high, and it is easy for farmers to bear.

For the chemical fertilizer industry, market-oriented reform may have labor pains, but long-term pain is not as good as short-term pain. After the throes of reform, I believe that the chemical fertilizer market will usher in a better tomorrow.