Government to remove subsidies on fertilizers

Government to remove subsidies on fertilizers

JAKARTA (JP): The government will gradually remove the
subsidies on fertilizers for farmers beginning April next year to
avoid rampant malfeasance in the distribution of subsidized
fertilizers, Agriculture Minister Soleh Solahuddin said on
Wednesday.

Soleh said farmers will be given cheap loans to buy
fertilizers so that the subsidy removal would not affect farming
activities.

"The move will be taken to clean up unfair practices in the
distribution of fertilizers in the country. Farmers will be given
special loans to buy fertilizers at market prices," Soleh said in
an agriculture coordination meeting in Padang, West Sumatra.

Soleh said the wide disparity between the government
subsidized price and the market price had resulted in rampant
malfeasance in the distribution of subsidized fertilizers
earmarked for farmers.

The subsidized price for urea fertilizer is Rp 450 per
kilogram while the market price is Rp 1,250 per kg.

Soleh said much of the subsidized fertilizer ended up in the
hands of plantation companies and had caused a scarcity of
fertilizer allocated for farmers.

He said many major plantation firms bought fertilizer at
subsidized prices due to unscrupulous distribution practices and
collusion on the part of officials of fertilizer producers and
village cooperatives.

Most of the malfeasance occurred in fertilizer distribution at
the regency level and in village cooperatives' warehouses, he
said.

"We will need at least one year to improve our poor
distribution system for fertilizer," Soleh said.

The government subsidizes three common fertilizers -- urea, ZA
and superphospate 36 (SP36) -- to assist farmers amid soaring
fertilizer prices and to boost the country's rice and food crop
production. Subsidies for other fertilizers have been abolished
gradually since 1990.

Early this year, the government started to subsidize kalium
chloride fertilizer in a bid to increase the country's rice
production.

Subsidies are limited to food crops and horticulture farming
and are exclusive for farmers.

Soleh said the government would provide Rp 5 trillion -- an
increase from Rp 2.1 billion initially allocated -- to subsidize
fertilizers during this year's planting season until next year's
harvest in March.

He said the funds would be used to subsidize four million tons
urea fertilizer, one million tons of both superphospate 36 and ZA
and 400,000 tons of kalium chloride.

Earlier this month, Director General of Food Crops and
Horticulture Chairil Anwar Rasahan said there was a scarcity of
fertilizers and it would hamper the ministry's efforts to
increase the country's food crop production.

He said the stock of kalium chloride on the market currently
stood at 60,000 tons, or only 17 percent of the total demand of
362,000 tons for next planting season which starts next month.

Data from the Ministry of Industry and Trade shows that state
fertilizer producer PT Pupuk Sriwijaya's (Pusri) stock of urea,
SP36 and ZA fertilizer was currently only enough to meet 95
percent, 40 percent and 46 percent of the demand respectively for
next month's planting season.

Pusri, which is the country's largest fertilizer producer, is
also assigned to handle the distribution of fertilizers produced
by other state fertilizer companies including PT Petrokimia, PT
Pupuk Kaltim and PT Pupuk Kujang.

According to the Association of Indonesian Fertilizer
Producers, domestic production of fertilizer in January to
September this year has reached over 4.5 million tons, in excess
of the annual domestic demand of 2.9 million tons for farming and
plantation and 330,000 tons for industry. (28/gis)