Indonesia is known as an agricultural country where most of its population works in the agricultural sector. This is why agriculture plays a key role in the Indonesian economy. Even during the Covid-19 pandemic, when other sectors experienced contractions, agriculture continued to grow positively and managed to save the economy.
The Indonesian government continues to boost several potential commodities to achieve targets in the agricultural sector. For example, the targets to achieve self-sufficiency for soybean, industrial sugar, and beef are 2020, 2024, and 2026 respectively. Indonesia is eyeing to become the world’s food barn in 2045. With all the potential and positive performances in agriculture, the government is optimistic about the realization of the targets.
Fertilizer Industry as Economic Pillar
Indonesia’s success in developing the agricultural sector can’t be separated from the role of the fertilizer industry. The industry is one of the supporting pillars for the national economy. It plays an important role in boosting agricultural sector production which props up the national food security program.
As a country that heavily relies on the agricultural sector, state-owned fertilizer producers are urged to keep producing quality fertilizers at low or subsidized prices. In addition to the quality and prices, the production should be stable and the distribution process for farmers’ needs in the growing season always runs smoothly.
The role of the fertilizer industry to the economy is also shown from the success of PT Pupuk Indonesia (Persero) in making a fairly good performance and contribution to the country amidst the pandemic.
At the General Meeting of Shareholders which took place on June 30, 2021, PT Pupuk Indonesia (Persero) announced that it had succeeded in recording dividend and tax payments to the state in the amount of Rp8.25 trillion, comprising dividends of Rp588 billion for 2020 and tax payments of Rp7.67 trillion for 2020.
President Director PT Pupuk Indonesia Bakir Pasaman said that one of the company’s strategic steps in 2020 was the change from a strategic holding to an activist holding. As the holding, Pupuk Indonesia has a more active role in the company’s business activities and operations.
Pupuk Indonesia is also more aggressively expanding its market to the non-subsidized sector, among others through the development of the Agro Solution program or what is currently called the Prosperous Program (Program Makmur). The company seeks to get closer to consumers and meet the needs of farmers by providing products other than subsidized fertilizers which are expected to help increase agricultural productivity.
This strategic success was reflected in a number of the company’s operational performance in 2020. Pupuk Indonesia made Rp71.88 trillion in revenue and managed to post a profit of Rp2.33 trillion.
In terms of production performance, Pupuk Indonesia had realized 19.38 million tons which consisted of 12.3 million tons fertilizer and 7.08 million tons non-fertilizer production. Meanwhile, the total fertilizer sales in 2020 reached 14.37 million tons.
Although Pupuk Indonesia is currently boosting the sales of commercial fertilizers, Bakir ensures that the company continues to prioritize the provision of subsidized fertilizers according to the allocation set by the government. In 2020, Pupuk Indonesia realized the distribution of subsidized fertilizers of 8.43 million tons or 63% of the total fertilizer sales which reached 13.37 million tons.
PKT’s Strategy Towards Renewable Energy Industry
In addition to the achievements made by Pupuk Indonesia above, the fertilizer industry also continues to make innovations to achieve Indonesia’s net zero emissions goal by 2060. PT Pupuk Kalimantan Timur (PKT), as a subsidiary of Pupuk Indonesia, is committed to using renewable energy. This commitment was stated during the company’s 44th anniversary on December 7, 2021.
President Director of PKT Rahmad Pribadi revealed that entering the second phase of the company’s growth chapter for the next 40 years, the company’s focus will be on the use of renewable energy. “Currently, the world has agreed that the use of fossil fuels must be reduced, as seen from the consensus agreed by 196 countries to end the use of fossil fuels at the COP26 conference which ended on November 13,” he said.
“Therefore, PKT’s challenge in the future is to implement our second growth strategy towards a renewable-based chemical industry. We will continue to develop the roadmap with a focus on 3 main foundations, namely energy efficiency through digitalization, business diversification with renewable energy raw materials. and carry out circular economy practices in order to utilize production emissions into new business commodities,” Rahmad added.
Indonesia is currently aiming to achieve net zero emissions by 2060, where the strategic steps being implemented by the government include reducing the use of fossil fuels.
Various parties are also now becoming more critical in assessing businesses based on their environmental credentials and the investors are very considerate about Environmental, Social and Governance (ESG) aspects in making business decisions. In line with this target, PKT has prepared a number of strategic initiatives in its second growth phase.
1. Business Diversification with Renewable Energy Raw Materials
First, PKT keeps spurring the company’s growth both organically and inorganically, including through business diversification. It is now being the company’s focus, apart from its promising potential, that it may be able to support the realization of zero emissions.
Therefore, PKT is seeking to diversify its business with renewable energy raw materials. “One of the main strategies that we will move is the downstream process or produce Ammonia and Urea derivative products. Furthermore, the company will not only expand, but also diversify into other natural gas-based products,” Rahmad explained.
2. Implementing Circular Economic Practice
Subsequently, PKT seeks to turn exhaust emissions into a new business commodity by implementing circular economic practices. By utilizing substances that normally become exhaust emissions, it is not only able to create new commodities, but also produce a greener business. PKT is exploring the use of by-products in the form of Carbon Dioxide (CO2) to be used as new commodities, including soda ash.
Besides CO2, PKT also has another raw material needed, namely ammonia. This indicates the company’s ability to optimize the potential of its products to be used as derivative products with added value.
3. Total Digitalization
Lastly, PKT is also implementing a total digitalization as a business strategy. All stages, starting from the production line, distribution, to land processing have implemented digital technology.
For its production process, PKT has applied smart production which can increase productivity. The fertilizer distribution process is monitored using the DPCS (Distribution Planning and Control System) which enables the company to monitor the shipment process from the factory in Bontang to warehouses in regions.
“It has been 44 years since PKT was established in Indonesia as a company that is committed to fulfilling national food needs. Along the journey, we realized that carrying out business activities must be accompanied by responsibilities, including to the environment to support sustainability. With a number of strategic initiatives that we have carried out, PKT is enthusiastic and ready to support the government’s efforts to achieve net zero emissions by 2060,” he concluded.
Written by: Renat