1.
ROLE OF MINERAL FERTILIZERS IN
TRANSFORMING AGRICULTURE IN
INDONESIA
REGIONAL STRATEGIC ANALYSIS AND KNOWLEDGE SUPPORT
SYSTEM (RESAKSS) ASIA CONFERENCE
CAMBODIA, SEPTEMBER 2013
FITRIA YASMIN

2.
Presentation Agenda
Policy Options
Fertilizer: Demand-Side Issues
Fertilizer: Market Structure
Fertilizer: Supply-Side Issues
Pricing Environment
Indonesia’s Agriculture Sector
Problems in Fertilizer Sector

3.
Agriculture Sector at Glance
• Providing food for 246 million of population.
• 13 percent of National Gross Domestic Product
• 35 percent of national work force
• 54.5 million hectares of total 181 million
hectares land area

4.
LOGO

5.
Fertilizer: Demand-Side Issues
Source: Derived from FAO (2013
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
TonNutrients
Nutrient Consumption in Indonesia 1990-2011
N Consumption
P2O5 Consumption
K2O Consumption

6.
Domestic Fertilizer Consumption by Product
Year Consumption ( tonnes)
Urea AS TSP/SP-36 NPK
Agriculture Industry
2007 4,249,409 592,225 701,647 764,821 637,456
2008 4,557,823 516,265 751,325 588,123 955,708
2009 4,623,889 372,096 888,607 706,937 1,417,703
2010 4,279,901 586,225 687,864 644,858 1,473,345
2011 4,528,949 499,238 953,759 731,502 1,794,767
NPK consumption is dominated by NPK Phonska, with grade 15:15:15,
granulated

7.
Market Structure
Domain Actors Structure
Production 5 manufacturers member of PT Pupuk
Indonesia Holding Company
(Public/state-owned enterprises)
Monopoly
Import 76 importer companies Competitive
Distributor 2,485 companies: 291 public, 1,920 units
of private companies, and 274 units of
cooperatives.
Competitive
Retail 40,077 units kiosk Competitive

8.
Nutrients Supply
Domestic nutrients Supply:
N = 91 percent of the total 3.97 million tonnes
P2O5 = 72 percent of the total 675,000 tonnes
Imported:
K2O = 100 percent

9.
Urea Production
0
1
2
3
4
5
6
7
8
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Tonnes
Millions
Year
Urea Production of PIHC Subsidiaries
Pupuk Sriwidjaja
Pupuk Kujang Cikampek
Pupuk Kaltim
Pupuk Iskandar Muda
Pupuk Petrokimia Gresik
TOTAL (PIHC)

10.
Non-Urea Production
Fertilizer
Production
2007 2008 2009 2010 2011 2012
Ton/Year Ton/Year Ton/Year Ton/Year Ton/Year Ton/Year
SP-36 488,847 742,986 636,207 441,223 521,486
AS 652,486 692,604 767,837 792,917 818,810 812,123
NPK 763,444 1,194,983 1,838,039 1,853,039 2,179,853 2,893,868
ZK 3,593 4,718 7,568 8,662 2,954 8,447
Organic
1,617 80,174 294,555 260,705 341,476 761,657

11.
Supply Chain
Plants Importer
Distributor
Farmers/Farmer
Organizations
Plantation Companies
Retailer

12.
Distribution System

13.
Pricing Environment
Fertilizer for rice farming is subsidized by
the government. The price is administered
by the government through the stipulation of
maximum retail price (MRP or HET)
Subsidy is given to the producers, not the
farmers.

14.
Maximum Retail Price (IDR/kg)
No.
Type of
Fertilizer 2008 2009 2010 2011 2012
1 Urea 1,200 1,200 1,600 1,600 1800
2 ZA 1,050 1,050 1,400 1,400 1,400
3 SP36 1,550 1,550 2000 2000 2000
4 KCl - - - - -
5 NPK 1,750 1,750 2,300 2,300 2,300
8 Organik 500 500 500 500 500

15.
LOGO

16.
If subsidy is removed…
Illustration for 2010 if subsidy is removed, HET is not applied which means
that urea price is not subsidized:
Urea price: IDR 4,500/kg (USD 436/ton)
Rice price at farm gate: IDR 2,720/kg (USD 264/ton)
Ratio Urea/Rice price = 1.65
Ratio N/Rice = 3.63
Note:
Conversion using exchange rate 1 USD = 10,320 IDR

17.
LOGO
Budget Allocation for Fertilizer Subsidy
= Heavy Fiscal Burden
IDR 6.8 trillion in 2007
IDR 14.9 trillion in 2008
IDR 17.4 trillion in 2009
IDR 18.7 trillion in 2010
IDR 16.4 trillion in 2011
IDR 16.9 trillion in 2012

18.
Summary: Problems in Fertilizer Sector in Indonesia
• Lack of farmers’ knowledge on proper location-specific use of
fertilizer
• Lack of monitoring and controlling that subsidy sometime not
reaching the target (retailers selling above HET price, forgery of
subsidized fertilizer, subsidized fertilizer is sold to companies at
unsubdized price, etc)
• Market distortion due to dual pricing system
• Unstable gas supply for fertilizer production

19.
Policy Options
• Long-term contract of natural gas supply
• Invest more on public goods (irrigation, agriculture roads,
R &D, extensions)
• Improve farmer database system
• Gradually reduce subsidy
• Socialize the recommendation of location-specific balanced
fertilizer allocation = empower extension officers
• Enforce good monitoring and controlling system