Effect of fertiliser subsidy on fertiliser usage in rice farming in Indonesia

Abstract

The Indonesian government has implemented a fertiliser subsidy policy to increase rice production. Most previous research utilised limited samples and focused on the overall impact of fertilisers on production. In this research, the scope is Indonesia and focuses on the impact of fertiliser on the different combinations of fertiliser usage and classified between subsidised and non-subsidised farmers. The objective of this research was to analyse the effect of fertiliser usage on the production of subsidised and non-subsidised farmers. The data utilised were secondary data from the Household Survey on Food Crops conducted in 2014 by Statistics Indonesia. A Cobb-Douglas production function was employed for several combinations of fertiliser usage and comparison between subsidised and non-subsidised farmers. BPS-Statistics Indonesia. Meanwhile, for TSP and NPK fertilisers, the increase in production was higher in subsidised farmers. Therefore, rice production can be effectively increased by increasing urea usage by non-subsidised farmers and increasing TSP and NPK fertilisers for subsidised farmers.