Government policy on gas prices has had a significant impact on the industrial sector, especially the agricultural industry. One sector that is greatly influenced by the gas price policy is the fertilizer industry, which plays an important role in supporting agricultural productivity and food security in Indonesia.
The government has implemented the Certain Natural Gas Price Policy (HGBT) for seven industries since 2020, one of which is the fertilizer industry. As the largest fertilizer producer in the country, Pupuk Indonesia assesses that the HGBT policy supports companies in maintaining the availability and affordability of fertilizer for farmers.
President Director of Pupuk Indonesia Rahmad Pribadi stated that natural gas-based fertilizers such as urea, NPK and ZA, will help increase the productivity of various types of agricultural crops, plantations, horticulture and so on. According to him, gas is an important raw material to ensure the availability, affordability of fertilizer and national food security.
“The link between fertilizer and food security is very clear. In general consensus, if food crops are not given N (Nitrogen) gas-based fertilizer, their productivity can decrease by 50%, even though Indonesia has gas sources. With a production capacity of 14.5 million tons per year, Pupuk “Indonesia is certainly ready to support the productivity of the agricultural industry through fertilizer,” said Rahmad, quoted from a press release, Thursday (7/3).
He added that the implementation of the HGBT policy will result in gas consumption cost efficiency of around IDR 10.91 trillion in 2022. With HGBT, domestic fertilizer production will become more competitive, so that the government can determine the optimal volume or allocation of subsidized fertilizer.
This is a step that helps Pupuk Indonesia, which is mandated to support national food security by providing quality and affordable fertilizer.
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Therefore, Pupuk Indonesia realizes the importance of sustaining HGBT which requires gas price regulations to remain competitive in supporting the expansion of subsidized fertilizer production capacity. Under these conditions, the productivity of the fertilizer industry can be increased significantly.
This is in line with the new policy that has been established by President Joko Widodo regarding increasing the allocation of subsidized fertilizer from 4.7 million tonnes to 9.55 million tonnes throughout 2024. Establishing this policy might be an important step in supporting farmers’ productivity.
Farmers, as the spearhead of food production, are very vulnerable to fluctuations in fertilizer prices and availability. If fertilizer prices soar, farmers may be encouraged to reduce fertilizer use which might impact crop productivity or even choose not to plant, which will ultimately impact national food production.
“For us in the fertilizer industry, the concern regarding food security is following 2024. Because the source of agroinput is gas. As is known, certain natural gas price policies for the fertilizer industry will end in 2024,” said Rahmad.
“If the HGBT policy is not continued, in terms of availability it may remain, but in terms of affordability for farmers there will be a question,” concluded Rahmad. (Mir/Z-7)
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