Minister of Industry Airlangga Hartarto said the selling price of fertilizer would decrease by around US$ 70 per ton if the gas price was US$ 4 per million metric British thermal units (MMBtu). If the gas price is US$ 4 per MMBtu, the production costs incurred are only US$ 180 per ton.
He believes that the decrease in gas prices in the fertilizer sector will ease subsidy expenditures for revenues. Surplus state revenues will increase by reducing subsidies from urea fertilizer and the State Electricity Company (PLN) of at least Rp. 11.8 trillion.
The fertilizer industry and petrochemical industry with gas prices of US$ 6.28 - US$ 16.7 per MMBtu caused negative growth in 2015 because 70% of production costs were used for gas costs. For the steel industry, uncompetitive gas prices have forced PT Krakatau Steel Tbk. discontinue steel slab and billet production facilities. For Krakatau Steel, the price of US$ 3 can only be operated again. Then pulp and paper, although pulp is number 6 in the world and paper is number 9, we actually have more potential than that.
The gas price of US$10 is still heavy even though it is compensated by industrial forest plantations. The ceramic industry is an industry with many players in the middle class, a gas price of around US$8.62 per MMBtu will not compete with even low-quality imported steel from China.
Airlangga stated that currently, the national production of rubber gloves reaches 1 billion units, while Malaysia can reach 14 billion units. With cheaper gas prices there, the industry in Indonesia immediately moved their factories to Malaysia.
Chairman of the Indonesian Fertilizer Producers Association (APPI) Dadang Heru Kodri said the most appropriate gas price for industries that use gas as raw material is US$ per MMBtu. If that is achieved, he believes state revenues will increase because the subsidy budget will decrease.
According to him, the reduction in gas prices is urgent because currently, the supply of imported fertilizers from China to Indonesia has reached 500,000 tons as of last October. Chairman of the Indonesian Flat Glass Association (AKLI) Yustinus Gunawan said the gas demand for the glass industry reached 10.3 million MMBtu in 2016.
According to him, the impact of falling gas prices on the sector will increase the production capacity of flat glass to almost 1.5 million tons per year from previously only 600,000 tons per year. He is optimistic that the decline in gas prices will create a more positive investment climate as the confidence of local and foreign investors increases so that they are willing to build new stoves.
According to the Ministry of Industry, if the gas price is lowered to US$4 per MMBtu, the potential state revenue of Rp53.86 trillion will be replaced by revenue from the industrial performance which grows to Rp85.84 trillion.
Bisnis Indonesia, Page-25, Wednesday, Nov 2, 2016
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