Govt criticized over decision to lift fertilizer subsidy

JAKARTA (JP): The House of Representatives criticized on Monday the government's decision to lift its subsidy on fertilizers in one go, saying the decision would further cut the country's rice production.

Members of House Commission III for agriculture, forestry and plantations, transmigration and food affairs urged the government to rethink the decision and to lift the subsidy gradually.

Without the subsidy, fertilizers would be very expensive for farmers, Commission chairman Umbu Mehang Kunda said in a hearing with Minister of Agriculture Soleh Solahuddin in a hearing.

Legislator Elyas of the ruling Golkar party said the government's decision to lift the subsidy would hamper the country's efforts to increase the productivity of rice and other crops.

The government decided to lift subsidies on fertilizers and remove all restrictions to their trade on Dec. 1 and promised to provide cheap loans to replace the subsidies to the tune of Rp 2 million per hectare.

The government previously subsidized the sale of fertilizers to farmers but removed the facilities because most of the subsidized fertilizers went to plantation companies.

However, most of the commission members doubted if farmers could benefit from the cheap loans pledged by the government because not all farmers would be able to meet the requirement and other procedures to obtain a loan.

However, Minister of Agriculture Soleh Solahuddin said that the subsidy removal would not be canceled because it was needed to improve the long-term distribution and trading of fertilizers.

"We're not only thinking of one or two planting seasons, but also for the long term. The subsidy cancellation will remove all distortions and dubious practices in fertilizer distribution and help us to control their prices in the future," he said.

Under the new regulation, all private companies are allowed to import fertilizers and distribute them to farmers through cooperatives and retailers at the market price.

The country's biggest fertilizer producer, state-owned PT Pupuk Sriwijaya (Pusri) previously held a monopoly on the importing of subsidized fertilizers.

The government has also raised the producer floor price of unhusked rice to between Rp 1,400 and Rp 1,500 per kilogram from Rp 1,000 per kilogram.

Until this month, the government subsidized urea, ZA and Superphospate 36. Subsidies on all other fertilizers had been abolished gradually since 1990, although Kalium Chloride was once again made available at a reduced price earlier this year in a bid to increase rice production.

The subsidies were intended exclusively for farmers and were limited to food and horticulture crops.

However, the resulting price differential proved too great a temptation for those responsible for distribution of the subsidized fertilizers and many were sold on at a profit to industrial concerns that could afford to pay a higher price.

Much of the subsidized fertilizer ended up in the hands of plantation companies, resulting in a scarcity among farmers.

Soleh blamed the ministries of industry and trade and agriculture for failing to control the unscrupulous practices in the fertilizer distribution -- which he said was allegedly conducted by Pusri officials.

"The minister of industry and trade should set up a team to investigate and trace the malfeasance in the fertilizer distribution system," he said.

Soleh said that Pusri currently had 150,000 metric tons of urea in stock and had promised to produce another 120,000 tons in the coming two weeks. (gis)