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)