Fertilizer policy in Indonesia

摘要

This paper discusses the development of fertilizer subsidy in Indonesia since the late 1960s when the Government started to subsidize fertilizer as part of its efforts to increase food production, particularly rice. The rationale of subsidizing as well as of reducing the fertilizer subsidy have been discussed at the beginning of this paper. The discussion on scope and method in determining the fertilizer subsidy is presented in the second section of this paper, followed by a strategy forthe reductionof the fertilizer subsidy. Indonesia's success in expanding its rice production is attributable to a combination of output and input price policies that have improved the profitability of rice cultivation. The subsidy on fertilizer, in particular, has been a key policy tool in Indonesia's rice price policy. It was meant to entice farmers to try modern rice technology, which depended critically on the provision of adequate fertilizers. Fertilizer subsidies are not without costs. During the 1970s, the Government had to provide about Rp 100 billion annually forthe subsidy. By 1988, this figure had increased sixfold to about Rp 754 billion. Since then, the Government has indicated its intention to reduce the total amount of fertilizer subsidy. At currentlevels of technology and fertilizer application for rice, the economic efficiency of additional fertilizer use is very low. Farmers are already well aware of the benefits of fertilizer use and hence no longer need encouragement via a subsidy. Fertilizernow represents less than 10 per cent of the total cash costs of rice production. Fertilizer subsidies, therefore, no longer appear to be appropriate for increasing rice production.