Govt criticized over decision to lift fertilizer subsidy

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)