Merging fertilizer firms will lead to subsidy removal: Minister
Merging fertilizer firms will lead to subsidy removal: Minister
Zakki P. Hakim, The Jakarta Post/Jakarta
The planned move by the government to merge all state fertilizer
firms should help cut production costs and eventually ease the
burden on the state budget by eliminating fertilizer subsidies
for farmers, a senior official said.
"Merging the companies would make them more efficient. In the
end, we will be able to reduce the subsidy, if not remove it
totally," Minister of Industry Andung A. Nitimihardja
told reporters.
Andung, who was speaking on the sidelines of his visit to the
MM2100 industrial estate in West Cikarang, West Java, added that
the move would be in line with the government's drive to remove
all kind of subsidies, including those for fertilizer producers.
Andung went on to say that he was of the opinion that there
should be a single player in the country's fertilizer industry,
with the government being in charge of tariff-related issues. A
single company would enjoy easier procurement of goods and
services, research and development as well as marketing, he
added.
Andung was responding to statements made by State Minister for
State Enterprises Sugiharto, revealing plans to revitalize the
country's state-owned enterprises (SOEs) through mergers and the
setting up of holding companies for state firms in certain
sectors.
The plan aims to improve the performance of state firms, many
of which are in bad shape financially due to inefficiency, lack
of professionalism and corruption. The plan is expected to start
later this year, although no comprehensive strategy has yet been
revealed.
At the moment there are five fertilizer manufacturers under
South Sumatra-based holding company PT Pupuk Sriwidjaja (Pusri),
and one regional joint venture firm PT ASEAN Aceh Fertilizer
(AAF) in Aceh.
Pusri's subsidiaries are PT Pupuk Kaltim in Bontang, East
Kalimantan, PT Petrokimia Gresik in Gresik, East Java, PT Pupuk
Kujang in Cikampek, West Java, and PT Pupuk Iskandar Muda (PIM)-1
and PIM-2 in Aceh.
The government plans to allocate Rp 1.3 trillion this year to
subsidize the country's fertilizer industry, about Rp 309 billion
short of what the industry had requested.
In 2003, the industry produced 5.97 million tons of urea
fertilizer, while national consumption was only 5.5 million tons.