Govt to remove gas subsidy to fertilizer producers

The government is considering to remove the subsidy on the sales of gas to local fertilizer producers and will instead give the subsidy directly to farmers, Koran Tempo reported on Monday.

The chairman of the association of fertilizer producers, Zainal Soedjais, said in Jakarta last week that an inter-governmental team that has been assigned to study the subsidy had agreed to change the system in the subsidy provision.

At present fertilizer producers buy natural gas at US$1.3 per million metric British thermal unit (MMBTU) for the production of fertilizer for local farmers? consumption and at US$1.85 per MMBTU for exports.

The system in the subsidy provision will be changed into a direct system because the government feels that the current subsidy does not really help farmers, Zainal said. Under the new system, the government will provide the subsidy on the sales of fertilizer to farmers, rather than on the sale of gas to fertilizer producers.

According to Zainal, the government in the past provided a direct subsidy on the sale of fertilizer to farmers but changed the system in 1998 due to pressure from the International Monetary Funds which provides a financial aid to help Indonesia cope with the crisis. (*)