Government has made available GH¢37 million to support fertilizer subsidy in 2009 in a drive to make the prices affordable and to enable small-scale food crop farmers to procure the product to improve yield.
Mr Kwesi Ahwoi, Minister of Agriculture, who announced the package at a press conference to launch fertiliser coupons on Thursday, said government's decision was to reduce the price of fertilizer at the retail level by absorbing all costs in excess of the 2008 prices.
The price of 50 kg NPK fertilizer in December 2008 was GH¢26.00 but since January this year without the government subsidy, the price had increased to GH¢52.00 by April 2009.
The Minister said with the current price level of fertiliser on the market, fertiliser use by the small-scale sector was estimated to drop by more than 70 per cent of previous levels and was likely to lead to a decline in cereal production by 20 per cent.
Ghana produces about 1.2 million tons of maize annually and a 20 per cent decline would imply a production shortfall of about 250,000 tons, which would cost government about US$62.5 million to import.
"Absorbing the difference in cost will imply an implicit subsidy of 50 per cent," the Minister said, adding that with the subsidy, fertilizer would be sold at a uniform price in all district capitals across the country.
This means that with the subsidy, a 50kg bag of NPK 15:15:15 will now sell at GH¢26; NPK 23:10:05 will go for GH¢24; Sulfate of Ammonia will sell at GH¢18 and Urea for GH¢26.
Mr Ahwoi said total funds made available were based on estimation that the small-scale sector would demand about 80,000 tons of fertilizer in 2009 for food crop production.
Small scale farmers with holdings of up to five hectares are expected to benefit from the subsidized fertilizer programme.
To prevent abuse of the subsidy by sellers, farmers and agricultural extension agents, Mr Ahwoi announced a series of measures to ensure that the system operated smoothly.
The measures include the use of the coupon system, under which agricultural extension agents will issue coupons to farmers in their operational areas to enable the farmers to buy the fertilizer at the shop at the subsidized price.
All coupons collected by the fertilizer retailer will then be sent weekly to the District Director of Agriculture for stamp and signature before forwarding them to the fertilizer company. The fertilizer companies will in turn forward the retrieved coupons to government for the payment of the subsidy component of the fertilizer price.
Mr Ahwoi said each region had a unique coupon, which was only valid in that region and would therefore not qualify for subsidy payment if used in another region.
He warned that any district director of agriculture or agricultural extension agent who misapplied fertilizer coupons would be severely sanctioned.
Agricultural officers would conduct regular and surprise checks at fertilizer retail shops to ensure that the right thing was done at the point of purchase.
To prevent the hoarding of coupons by farmers, the Minister said extension agents would be made to supervise the picking of fertilizer by farmers who requested over 20 bags of any particular kind of fertilizers.
He urged the security agencies at the borders and MOFA offices to be on the lookout for people attempting to cross the borders with fertilizers.
The Minister expressed the hope that with justification for subsidizing fertilizer in the country and the measures to stem abuse, the country would see a jump in agricultural output to ensure food security.