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End of natural gas subsidies could mean more fertilizer subsidy spending
Allowing natural gas subsidies for industry to lapse could cause fertilizer subsidy spending to increase, state-owned fertilizer holding company PT Pupuk Indonesia told lawmakers on Wednesday, noting that natural gas was key to making fertilizer.
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Farmers rest before continuing to plant rice seedlings in Batujai village, Central Lombok, West Nusa Tenggara, on Jan. 25, 2024. (Antara/Ahmad Subaidi)
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llowing natural gas subsidies for industry to lapse could cause fertilizer subsidy spending to increase, state-owned fertilizer holding company PT Pupuk Indonesia told lawmakers on Wednesday, noting that natural gas was key to making fertilizer.
Rahmad Pribadi, president director of Pupuk Indonesia, said every US$1 increase in the price of natural gas would cost the government Rp 2.6 trillion ($166.9 million) more in subsidies to maintain its target fertilizer price.
The government natural gas subsidy program is set to expire this year if no decision is made to extend the policy.
The program, instated in 2020, allows manufacturers in seven industries – steel, ceramics, glass, petrochemical, fertilizer, oleochemical and rubber glove – to purchase natural gas at the fixed price of $6 per mmbtu.
The Energy Ministry said it would discuss the continuation of the program with the Industry Ministry and Finance Ministry.
“We want cheap energy for industry. The Energy Ministry wants to continue, but we will look at the situation because crude prices are still high and unstable,” Energy Minister Arifin Tasrif said in Jakarta on March 11, as reported by Kontan.
Without the controls, the domestic natural gas price could be some $9 per million British thermal units (mmbtu), CNBC Indonesia reported in October 2023.
