Jakarta (ANTARA News) - Indonesia's government may subsidise the price of wheat flour by paying a 10 percent value added tax for locally processed wheat in order to lower the price of local flour, an industry official said on Wednesday.
Local flour prices have risen following a surge in the wheat price.
"The government is discussing the possibility of paying the value added tax for wheat processed by flour mills to put a brake on rising local wheat flour prices," said Franciscus Welirang, chairman of the Indonesian Wheat Flour Producers Association.
The move is intended to protect small businesses which use wheat flour, such as bakeries and noodle-producers, as these have been hurt by higher flour prices, Welirang told Reuters. Noodles are a staple part of the Indonesian diet.
Indonesia imported more than 4 million tonnes of wheat last year and still relies entirely on imported wheat to meet its needs. As a result, the price of local flour is affected by changes in the international commodity price.
Indonesians consume a total of around 3.8 million tonnes of wheat flour per year, with 3.3 million tonnes supplied by domestic producers and the remainder imported.
The noodle industry accounts for 60 percent of total consumption while bakeries and households account for the rest. (*)