Jakarta – The price of subsidized fertilizer may increase by as much as 80 percent next year as a result of a proposed lower subsidy allocation, the Office of the State Minister for State Enterprises and state fertilizer firms estimated in a joint simulation.

Said Didu, secretary to the state minister for state enterprises, said Friday that the government – through the Agriculture Ministry – had proposed Rp 11.3 trillion (US$1.1 billion) to subsidize fertilizer products next year, a much smaller amount compared to the Rp 17.5 trillion allocated this year and the Rp 15.18 trillion in 2008.

The proposal, incorporated under the 2010 state budget bill, is still subject to deliberation by the House of Representatives. Under the proposed figure, Said added, farmers would be the hardest hit.

"The Ministry, along with state fertilizer companies, have done a simulation to estimate how much of a budget was needed for the subsidized fertilizers.

"We found two options to resolve the lack of subsidies: increasing the fertilizer prices or reducing the amount of subsidized fertilizer," he said, adding that the first option would lead to an increase in prices of up to 80 percent.

"I do not think that cutting the subsidized amount of fertilizers would be a wise decision because farmers depend on fertilizers so much. They will be angry because they will not get enough fertilizer for their crops."

Using the 2010 budget for subsidized fertilizers, the Agriculture Ministry plans to distribute urea (7 million tons) and several kinds of fertilizers such as Superfosfat (1 million tons), NPK (2.2 million tons), ZA (0.95 million tons) and organic fertilizers (0.6 million tons).

At the moment, farmers are only paying Rp 1,200 per kilogram for urea fertilizer, compared to the Rp 6,000 per kilogram market price. Said added it was impossible to subsidize all kinds of fertilizers using the money allocated because it would bring serious losses to fertilizer companies.

The proposed 2010 state budget bill subsidy allocation – including fuel and electricity subsidies – is currently set at Rp 144.36 trillion, lower than Rp 166.70 trillion allocated for this year. (naf)