Govt agrees to lower price of gas sold to fertilizer producers

The government has approved the proposal made by fertilizer producers to cut the price of gas used as the raw material for the production of fertilizer for local consumption to US$1.2 per MMBTU from US$1.3 per MMBTU, Kompas reported on Wednesday.

The president director of state owned fertilizer producer PT Pusri, Zaenal Soedjais said in Jakarta on Tuesday that the price of gas used for the production of fertilizer for exports, however, remained at a range between US$1.6 and US$1.8 per MMBTU.

"The approval was made during a limited cabinet meeting on economy on Monday evening," he was quoted as saying.

With the drop in the price, the government will automatically raise the subsidy fund allocated for the production of fertilizer so that the lower price would not cause a loss to state owned oil and gas company Pertamina.

Zaenal said with the cut in the gas price, fertilizer producers would be able to set fertilizer prices at about Rp 1,150 per kilogram to farmers.

About 7 percent of the country?s total gas production are used for the production of fertilizer, and the others are for the production of liquefied natural gas (LNG). Indonesia?s fertilizer exports fell to about 1 tons in 2001 from about two tons in the previous year due to the halt in the operation of two Aceh-based fertilizer producers PT PIM and PT AAF for several months late last year.

Zainal told Bisnis Indonesia earlier that the price of natural gas in Indonesia is far higher than those in Malaysia where the gas price is set at between $0.5 to $0.6 per MMBTU. 00But he said that although the price of the raw material is higher, the price of the fertilizer in the country is 30 percent lower than those in Malaysia. "It is a really problem for fertilizer producers," he said. (*)