The Technical and Price Efficiency of Fertiliser use in Irrigated Rice Production

Rapid growth in chemical fertiliser use has been key to Indonesia's rice production increase during the past two decades. Very high fertiliser application rates in the country's major irrigated rice areas prompt concerns about technical and economic inefficiency, as well as possible adverse environmental impacts, particularly since fertiliser subsidies constitute a significant financial burden to the government. A 1989 national farm cost survey shows that rates of nitrogen and phosphorus use in wide areas of Java and Bali, and in some parts of Sumatra, are often far higher than those recommended by agronomists both in Indonesia and in similar Asian countries. The analysis indicates that fertiliser rates presently exceed profit maximising levels on much of Java, leading to a net financial loss estimated at over $29 million annually. More intensive extension efforts and changes in pricing strategy are proposed to improve technical and economic efficiency.