The government’s policy through Presidential Regulation (Perpres) No 113 of 2025 concerning Subsidized Fertilizer Management is considered a strategic step to improve the national fertilizer subsidy system.
Professor of Agricultural Economic Policy and Sustainable Resources at IPB University, Prof A Faroby Falatehan, emphasized that this regulation is an improvement on previous policies while also promoting efficiency in the fertilizer industry and strengthening food security.
In a webinar discussing the policy, Prof Faroby explained that Perpres 113 of 2025 is an improvement on Perpres No 6 of 2025. This policy is also a response to the evaluation by the Supreme Audit Agency (BPK), which highlighted the inefficiency of fertilizer subsidy management.
“Previous problems included inefficient subsidy management, high fiscal burdens, frequent delays in subsidy payments due to payments being made in the following year, and weak transparency in subsidy calculations,“ said the lecturer from the Department of Resource and Environmental Economics, Faculty of Economics and Management (FEM) at IPB University in the webinar ”Analyzing Presidential Regulation No 113 of 2025” on 2/18.
He explained that the fundamental change in the new policy lies in the transformation of the subsidy scheme from a cost plus basis to a market based basis. Under the previous scheme, fertilizer producers calculated production costs, the government set the maximum retail price (MRP), and then covered the cost difference through state subsidies.
“Through Presidential Regulation No 113 of 2025, subsidies are calculated based on the difference between the market reference price and the HET paid by farmers. The reference price takes into account domestic commercial fertilizer prices, international prices, exchange rates, and reasonable distribution costs,” he explained.
According to Prof Faroby, this new scheme makes subsidy calculations simpler, more transparent, and more adaptive to market dynamics. The policy also strengthens incentives for fertilizer industry efficiency because companies have different production cost structures. The market based system encourages increased efficiency and technological modernization.
This policy, he said, also introduces partial subsidy payments before the production process to improve the liquidity of fertilizer companies. That way, production and distribution can run faster and on time.
“With initial funding, the industry has certainty of financing for raw materials and the production process. This is expected to strengthen the stability of fertilizer distribution for farmers,” he added.
In addition, the subsidy monitoring system is strengthened through the integration of digital and real-time monitoring. The government can compare fertilizer prices with commercial and international prices to ensure that subsidies are more accurate and accountable.
From the farmers’ perspective, this policy is expected to maintain the affordability of fertilizer prices while ensuring timely availability. For the government, subsidy reform is considered capable of reducing the risk of budget overruns and increasing the efficiency of fiscal spending in the agricultural sector.
However, Prof Faroby reminded that the implementation of the policy still faces challenges, particularly regarding the need for accurate market price data, the readiness of the bureaucracy in managing initial production subsidies, and the validity of data on farmers receiving subsidies.
“The success of this policy depends on data transparency, fertilizer distribution digitalization, and coordination between the government, regions, and industry. If implemented optimally, this reform can strengthen food security while revitalizing the national fertilizer industry,” he concluded. (AS) (IAAS/KQA)
