Govt to increase subsidies for fertilizer: Soleh

Govt to increase subsidies for fertilizer: Soleh

JAKARTA (JP): The government plans to increase subsidies for
sales of fertilizers to farmers in a bid to check rising farming
costs and ensure quality crops, the agriculture minister said
here yesterday.

Soleh Solahuddin said a proposal on the planned increase had
been made to the International Monetary Fund.

"The IMF reacted positively on our plan on the subsidy for
fertilizers because they understand the benefit of the subsidy
for farmers. But we still have to discuss the amount of the
subsidy because it will affect our state budget," Soleh said
after a meeting with IMF Asia Pacific director Hubert Neiss.

The government is gradually phasing out all subsidies to meet
dictates of the reform program agreed upon with the IMF, which
pledged to provide US$43 billion for the country's ailing
economy.

Reductions in fertilizer subsidies are part of the program.

Soleh said the subsidy for kalium chloride fertilizer (KCl),
which has been abolished, would be reintroduced again to help
boost rice production.

Reduction of KCL use in rice farming has resulted in a
downward trend in the country's volume of production, Soleh said,
attributing this to farmers no longer being able to afford the
fertilizer.

Rice prices

"The lack of KCl fertilizer in rice farming will cause the
decrease in rice production and quality, (making it) vulnerable
to disease."

Soleh said the government's subsidy on KCl fertilizer was
planned at Rp 1,250, or 60 percent of its current price of Rp
2,100 per kilogram.

"If we can subsidize it for Rp 1,250, farmers can buy KCl
fertilizer at Rp 850," he added.

The newly appointed minister of the Reform Cabinet said the
government also planned to increase the floor price of unhusked
rice to Rp 1,000, from Rp 700 per kilogram, to increase farmers'
income.

He said the planned increase, the third in the last four
months, was expected to further encourage farmers to boost rice
production.

"The main objective of the rice price increase is to improve
the real incomes of the farmers, because farmers previously only
got a small piece of the pie," he said.

"The government will discuss the plan in the next cabinet
meeting on Wednesday. If the meeting approves the plan, I hope it
can be effective next month."

Soleh said he was not concerned about the country's rice
stocks because imports would make up for the shortfall.

"Our rice stocks will increase because by the time the stocks
run out, we will receive 1 million tons of rice from imports and
1.5 million from multilateral agreements with several countries,
including Thailand and Japan," he said.

The State Logistics Agency (Bulog) said Wednesday the agency's
existing rice stocks stood at 2.1 million tons, or enough to
supply the domestic demand for three to four months.

"With the additional 2.5 million tons, Bulog will only need to
import 300,000 to 500,000 tons of rice," he said.

Soleh said national rice production this year was expected to
reach about 48 million tons, down about four million tons from
the target. (gis)