Mon, 07 Mar 2005

Food prices may rise 1%-5%: Mari

The Jakarta Post, Jakarta

Assuming that transportation costs rise by no more than 10 percent, the recent fuel price hike will only lead to an average increase in basic food prices of 5 percent, according to Minister of Trade Mari Elka Pangestu.

Speaking during a routine market inspection on Saturday, Mari said the forecast was in line with calculations made by the Indonesian Retailers Association (Aprindo) and the Indonesian Food and Beverages Association (Gapmi).

"As calculated by Aprindo and Gapmi, the rise in food prices as a result from the fuel price hike is predicted to hover from 1 to 5 percent.

"This is based on the assumption that transportation costs go up by no more than 10 percent," Mari said, citing an assessment made by the ministry of transportation.

Effective March 1, the government has hiked domestic fuel prices by an average of 29 percent so as to reduce the costly fuel subsidy and in part set aside more funding allocations for public services.

Critics say transportation costs will be the hardest hit by the policy, pushing production costs up, and will in turn increase the prices of basic foods.

However, according to Mari, with fuel costs comprising about 20 percent of total transportation costs -- according to the calculations from the ministry of transportation, "The 29 percent hike in fuel prices would result in an increase of between 7.5 to 10 percent in transportation costs."

Acknowledging that the prices of basic foods -- notably in traditional markets -- have been fluctuating more she had predicted, Mari said that factors other than fuel prices had come into play.

"We've been monitoring prices on the market and finding that the increase was indeed directly related to the fuel price hike, but there are also price differences due to other factors," said Mari.

She said, as an example that the fluctuating prices of onions and rice in traditional markets had been the result of supply problems due to floods and a late rice harvest, respectively.

"The most important thing now is to ensure that basic foods are readily available, she said." (004)