5 December 2017

Tanzania: Bulk Procurement System Decreases Fertiliser Prices

Dar es Salaam — The Tanzania Fertiliser Regulatory Authority (TFRA) has cautioned government to ensure it sets a proper arrangement for distributors to transport the commodity that will be imported through the newly introduced Bulk Procurement System (BPS) in to avoid price speculations.

TFRA econometrician Ben Nkonya told The Citizen that reduced farm gate prices will be achieved if retailers' networks and small holder farmers groups are strengthened through the Local Government Authority coordination.

"The translation of bulk procurement system into reduced farm gate prices will only apply when the distribution to wholesale and retail markets is done in bulk," he stressed.

He said the cost of transporting a 50-kilo fertiliser bag is Sh 40,000 from Dar es Salaam to Rukwa but only Sh130,000 per tonne using a 10-tonne truck.

In view of this, he said that the utilisation of economies of size makes transport cost to be 16 percent of the transportation in small lots.

"Economies of scale have already started applying in Makambako whereby retailers have teamed up to transport 45 tonnes at the rate of Sh2,250 per 50-kilo bag from the Dar es Salaam distributors' warehouse in bulk compared with the TFRA transport cost of Sh3,559 per 50-kilo bag, which makes it a volume discount of Sh1,309 or 37 per cent," he said.

"This has significantly reduced the transport cost as compared to each retailer transporting on his or her own. If supported by the government, it may result in very significant farm gate price reduction."

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