Indonesia's Fertilizer Industry Transformation: Key Developments

New Regulatory Framework for Subsidized Fertilizer

The Indonesian government has taken a significant step towards reforming the fertilizer subsidy system through the issuance of Presidential Regulation (Perpres) No. 113/2025. This new regulation revises the previous Perpres No. 6/2025 on the governance of subsidized fertilizer, marking a crucial development in the country's agricultural policy. The updated framework aims to improve the efficiency and competitiveness of the national fertilizer industry while addressing long-standing structural challenges.

Shift from Output-based to Input-based Subsidies

A key feature of Perpres 113/2025 is the transition from output-based subsidy mechanisms to input-based subsidies. This policy shift is considered more sustainable and is expected to have far-reaching implications for the fertilizer sector. By changing the subsidy structure, the government aims to create a more effective support system for farmers while promoting industry efficiency.

Addressing Structural Challenges

The new regulation is designed to tackle various structural issues that have historically burdened Indonesia's fertilizer industry. These challenges include inefficiencies in subsidy distribution, production costs, and market dynamics. By reforming the subsidy system, the government hopes to create a more stable and competitive fertilizer market that benefits both producers and end-users.

Industry Implications and Future Outlook

The implementation of Perpres 113/2025 is expected to have significant implications for Indonesia's fertilizer industry. As the sector adapts to the new input-based subsidy system, stakeholders anticipate improvements in production efficiency and market dynamics. The government's commitment to this reform was highlighted during a recent discussion at the Ministry of Agriculture, emphasizing the importance of this policy change for the industry's future.