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)