Govt reportedly fails to pay fertilizer subsidy
M. Taufiqurrahman, The Jakarta Post, Jakarta
An association of fertilizer producers revealed on Monday the government has yet to meet its obligation to disburse a subsidy aimed at producing affordable fertilizers for the domestic market.
The chairman of the Indonesian Fertilizer Producers Association (APPI), Zaenal Soedjais, said the Rp 1.31 trillion (US$147.19 million) subsidy -- stipulated in the state budget for financial year 2003 -- had not been distributed by the government to the country's fertilizer producers.
"A ministerial decree pertaining to the subsidy was already issued in February, but thus far there has been no authorization from the Ministry of Finance to disburse the fund," he told reporters after a hearing with the House of Representatives Commission V on trading and industry.
Zaenal also disclosed that the government had not met its obligation to pay a natural gas price subsidy worth Rp 672 billion for 2002.
The subsidy, called the domestic gas incentive, was aimed to safeguard the supply of low-priced gas for fertilizer producers amidst the volatility of oil and gas prices.
The top executive of fertilizer firm PT Pupuk Sriwijaya (Pusri) said that the government's unwillingness to disburse the subsidy has already cost the producers as they have suffered losses from paying interests on loans and foreign exchange fluctuations.
APPI -- whose membership includes Pusri in South Sumatra, PT Pupuk Kaltim in East Kalimantan, PT Petrokimia Gresik in East Java, PT Pupuk Kujang in West Java, PT Pupuk Iskandar Muda and PT Aceh Asean Fertilizer in Aceh -- has a total production capacity of 6 million tons of urea and 4 million tons of ammonia in 2002.
Along with calling on the Ministry of Finance to disburse the subsidy immediately, the association also urged the government to do more in supporting the fertilizer industry.
"It is difficult for Indonesian producers to compete with producers in foreign countries to get a significant share in the world market when the price of gas in Indonesia reached $1.85 or $2 per million metric British thermal unit (MMBTU)," he said, adding that countries like Russia and Saudi Arabia set the price at 60 U.S. cents.
He said that as long as the price of gas remained high, there were little possibility that the retail prices of fertilizer in the country would decline.
"Even if it was paid immediately, the subsidy wouldn't help much if the price of domestic gas is $1.50 to $1.80 per MMBTU," he said.
He cited the example of what Malaysia had done to help the fertilizer industry.
"Malaysia, whose gas supply comes from Indonesia, has discounted the price of gas for the petrochemical industry by 50 percent. This has helped the industry there a lot," Zaenal said.
When asked if the association also asked for the same treatment, he said: "For the price of urea to be lowered from Rp 1,150 to Rp 1,050 per kilogram, there has to be a 20-cent reduction in the price of gas. We don't ask much, but a price of $1 per MMBTU of gas is most suitable for us."