Tuesday, 21 June 2011

Old Pattern Recommended For Chanelling Of Fertilizer Subsidy To Farmers

Until sure-fire and on-target method is found to extend fertilizer subsidy directly to farmers, it is proposed that channeling of subsidy be based on old method. In principle the Union of Reliable Farmers and Fisherman (KTNA) agreed that the Government extended fertilizer subsidy directly to farmers. The question was how should the mechanism and application be to be make sure that the extention of subsidy and be effective and on-target. This was disclosed by Ir. H. Winarno, Chairman of KTNA National to Business News.

Among the factors that made direct giving of subsidy to farmers were low educational level of farmers. The approach to farmers in subsidy giving varies: by using chips, card, buying fertilizers through ATM with direct discount deducted to payment, by cash through farmers group, etc. still all these procedures are too difficult to be understood by farmers. In spite of comparative studies exercised with many countries, the mechanism of subsidy distribution to farmers remain difficult because their educational levels are low.

Assuming that trial procedures of giving fertilizer subsidy to farmers at Karawang Regency were successful, but before it is applied at national scale, more trial processare still necessary to be exercised in other provinces in Java and in other islands. The objective is to make farmers understand the mechanism of subsidy pipelining. But since the trial process at the Regency of Karawang was unsuccessful KTNA expected that subsidy giving to farmers once again be based an old platform, until an effective way to give fertilizer subsidy to farmers is found.

The need for fertilizer in the agriculture industry is only 10% of production cost, and farmers are not aware that the fertilizer they buy has subsidy content. To make farmers aware that there are subsidized and non subsidized fertilizers, supposedly the outlet for selling subsidized fertilizers be differentiated from those selling non subsidized fertilizers. The kiosks selling fertilizers in food plantation areas are outlets selling subsidized fertilizers, while non subsidized fertilizers better be sold in plantation areas.

Other handicaps in giving fertilizer subsidy directly to farmers are insufficient effort in illumination to farmers. Kiosks belonging to distributors and legal retailers channeling subsidized fertilizers from certain factories must be painted differently from kiosks of distributors and retailers selling subsidized fertilizers from other company. For example, gas stations of Pertamina are colored differently than gas stations belonging to foreign private companies. In such a way farmers could easily make sure that the outlets are not selling fertilizers above Highest Retail Prize (HET).

From the fertilizer factory’s viewpoint the mechanism of giving fertilizer subsidy to farmers better, because factories do not have to take all the troube of liquidating subsidy for the Government. Quite frequently fertilizer factories must face the problem of late liquidation of fertilizer subsidy for a long time, which disrupts the company’s cashflow.
The government’s wish to change the mechanism of subsidy giving directly to farmers is not as simple as imagined. The test trial of giving fertilizer subsidy directly to farmers in the Regency of Karawang, West Java by giving cash as substitute to subsidy, turned out to be more complicated that the old platform.

To improve the mechanism of fertilizer-subsidy distribution, during last year’s planting season the Government exercised test procedure of subsidy pipelining directly to farmers in the Regency of Karawang. Under that mechanism,  farmers buy fertilizer at market price, while the subsidy is given in cash through farmers groups. The government was expecting that direct giving of subsidy to farmers could prevent leaking of fertilizer subsidy to other business line like plantation or fishery. Somehow the test trial of subsidy giving directly to farmers by giving them cash, turned out to be more complicated than using the old patern.

Therefore, the Ministry of Agriculture recommended that the procedure of distributing subsidized fertilizers return to the RDKK (Definitive Plan of Groups Need) Plan. Technically, pipelining of subsidized fertilizer distribution directly to farmers is not any better than that RDKK system. With high discipline, distribution of subsidized fertilizers through RDKK turned out to be more effective, and leaking was relatively very small. Farmers, apart from obtaining fertilizers according to the amount needed also get price that is guaranteed to be in accordance with HET.

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