Price Policies in Central Java, Indonesia: Impact on Demand for Urea Fertiliser in Paddy Production and the Resulting Nitrate Contamination
Since late 1970's, the Indonesian government has implemented a price support policy on paddy and a price subsidy policy on fertiliser for paddy production. These policies had been successful both in increasing fertiliser use as well as paddy production. Increase in fertiliser use, in particu...
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| Format: | Thesis |
| Language: | English English |
| Published: |
2000
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/8262/1/FEP_2000_10%20IR.pdf |
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| Summary: | Since late 1970's, the Indonesian government has implemented a price
support policy on paddy and a price subsidy policy on fertiliser for paddy
production. These policies had been successful both in increasing fertiliser use
as well as paddy production. Increase in fertiliser use, in particular nitrogen
fertiliser, however, also means increase in nitrate contamination in ground
water. Nitrate contamination in ground water exceeding 10 N03 mgIL is known
to cause ''blue baby" syndrome or methemoglobinaemia and stomach cancer
(Lebby and Bogges, 1990). As most of rural population in Java depends on
ground water as a source of drinking water, nitrate contamination poses serious
threat to society and should be mitigated immediately.
This study attempts to evaluate the impact of price support policy on
paddy and subsidy policy on fertiliser price on fertiliser use, paddy production,
farmers' welfare and nitrate contamination in ground water in Central Java
Province Indonesia. Cross sectional data of paddy farms and dug-wells were
used in this study. Eight regencies were selected using stratified random sampling based on urea application rates. For each regency, two districts were
selected and for each district, five units of farm and five dug-well samples were
chosen based on simple random sampling. A translog profit function and cost
share function for urea with nitrate contamination were estimated
simultaneously for derived demand for urea fertiliser and supply of paddy
functions. These functions were then used to evaluate the impact of price
policies.
Fertilisation of nitrogen in paddy cultivation is the main source of nitrate
contamination in ground water. About 86.9 percent of the dug-wells water
samples had nitrate contamination with an average of 2.01 ppm N03-N, 1.3
percent had contamination exceeding the maximum admissible requirement for
drinking water at 10 ppm.
The price subsidy on urea fertiliser and price support on paddy were
effective in boosting profit of paddy farms as well as paddy production. The
price policies contributed significantly to urea fertilisation rate, and thereby to
paddy productivity. At the same time these policies also generated nitrate
contamination in rural ground water. Nitrate contamination had not significantly
influenced profit as well as demand for urea fertiliser and supply of paddy.
Simulation results confirmed that price policies, which did incorporate
environmental policy, in particular nitrate contamination, would generate nitrate
contamination in ground water. It is likely to continue to increase in the future if
environmental consideration continued to be ignored. Hence, the environmental
policy should be integrated in price policies. |
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