Govt reportedly fails to pay fertilizer subsidy

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."