Government asked to remove subsidy to Asean Fertilizer

A member of Aceh legislative council has called on the government to remove the subsidy on the sale of natural gas to fertilizer producer PT Asean Aceh Fertilzer (AAF) because none of the company?s fertilizer products are sold to farmers, Bisnis Indonesia reported on Thursday.

Muhammad Taib, a member of the Golkar faction at the North Aceh Legislative Council, said in Lhokseumawe on Wednesday that the subsidy given to the fertilizer producer only benefited the company as most of its fertilizer products were exported.

"The subsidy should be reviewed given the fact that none of the fertilizer products are sold to the local farmers," he was quoted as saying.

PT Asean Aceh Fertilizer buys natural gas from Pertamina through its production-sharing contractor at a subsidized price of US$1 per MMBTU. According to the government regulation, the subsidy should be given only for the sales of natural gas used for the production of fertilizer, which will be sold to farmers. The price of natural gas for other purposes is sold at market prices.

Muktar Yusuf, the spokesman of AAF said that the subsidy is still needed to allow the company to compete in the international market. At present, the company produces about 645,000 tons of urea and 355,000 tons of ammoniac a year. Between 10 percent and 20 percent of the total production are sold in the domestic market and the remainders are exported to Vietnam, Thailand, Myanmar, Singapore, South Korea and Taiwan.(*)