Study of the impact of increasing the highest retail price of subsidized fertilizer on rice production in Indonesia

Abstract

Abstract Fertilizer plays an important role in agricultural production, and up to now it has always been subsidized through the selling price mechanism. This study aims to analyze three related areas, namely, the subsidized fertilizer policy dynamics, the development of subsidized fertilizer highest retail price (HRP), and the effects of its subsidy price changes on rice production. The study uses both the primary data from research in West Java in 2020 and the data from 2016 national farmer panel and also the secondary data. The data analysis was carried out quantitatively, namely, multiple regression analysis and qualitative descriptive studies. The results of the analysis show that the profit value of lowland rice farming is Indonesian Rupiah (IDR). 13.89 million/ha/season and Revenue per cost ratio (R/C) is 1.85. The proportion of fertilizer input cost to the total lowland rice farming cost reaches 10.25%. The analysis of the nationwide impacts of the HRP increase of the subsidized fertilizers by IDR. 300/kg shows the result that there would be a decrease in national rice productivity by 0.09 tons/ha, a decrease in national rice production by 0.94 million tons milled dry rice (MDR/GKG), and a decrease in the national rice harvest area equivalent to 186,219 ha. It is suggested that in the future, some efforts and measures are needed to make the use of subsidized fertilizers to be more effective and efficient. In order to maintain national rice production, a program to increase the harvested areas is needed.