Agriculture minister joins outcry on rice import tax

Agriculture minister joins outcry on rice import tax

JAKARTA (JP): Agriculture minister Soleh Solahuddin has sided
with analysts in faulting the state minister of food affairs and
horticulture's proposal for a 40 percent duty on rice imports.

Soleh said on Friday the government should improve the
distribution mechanism of the State Logistics Agency (Bulog) and
the provincial logistics agencies (Dolog), rather than blindly
imposing an import duty recommended by A.M. Saefuddin.

"It is not important how big the import duty is. What is of
utmost importance for us is to ensure that Bulog and Dolog buy
the rice produced by local farmers at the floor price, and that
the floor price is set at a secure level to protect farmers," he
said after installing several new officials in his office.

Soleh said the government should also study the impact of
imposing the duty, including whether it would contravene
international regulations.

He reminded that the government committed to capping import
duties on food at 5 percent in its agreement with the
International Monetary Fund (IMF) last January.

"I think it will be better if we let the imported rice enter
the country at the lower prices, but Bulog, Dolog and
cooperatives have to buy local rice directly from farmers at the
floor price."

The government recently set the floor price of unhusked rice
between Rp 1,400 (18 U.S. cents) and Rp 1,500 per kilogram -- an
increase from Rp 1,000 late last year -- to compensate for the
removal of fertilizer subsidies and encourage farmers to plant
rice in a bid to increase domestic rice production.

The executive director of the Center for Agricultural Policy
Studies, H.S Dillon, and Bungaran Saragih of the Bogor Institute
of Agriculture said the move would contradict the government's
pledge to adopt a free market mechanism.

"The plan is counterproductive to the government's recent move
to liberalize rice trade and in easing its controls on rice
prices," Dillon said.

Bungaran added: "Let the price of rice be determined by market
mechanism."

Dillon and Bungaran agreed that the government, instead of
protecting farmers by imposing an import duty, should ensure that
crucial farming materials were readily available and affordably
priced to make its objective of expanded rice farming feasible.

"What matters most to farmers is that high quality seeds and
fertilizers are available at the time of planting, when they are
needed," Dillon said.

Saefuddin made the proposal last week in order to protect
local farmers from falling international prices.

By imposing 40 percent import duties, he said, local prices of
the imported rice would stand at the same as rice grown
domestically.

Saefuddin said that the international price of rice ranges
from US$230 to $270 per ton, compared to the domestic price of
medium quality rice of about Rp 2.75 million (US$323) per ton or
Rp 2,750 per kilogram.

"If the import duty was too low, the domestic market would be
flooded with imported rice undercutting local rice prices," he
said.

Earlier last week, trade and industry minister Rahardi Ramelan
said the government would impose an import duty on rice in a bid
to protect local farmers.

Rahardi said that the import duty on rice will be announced
next month.

Soleh said his office did not consider imported rice a threat
to local rice even though the government liberalized its trade in
September.

"The price of imported rice would be determined by the market
price and the rupiah's exchange rates against the U.S. dollar. I
do not believe that private companies could import rice at such a
huge rate," Soleh said.

The country liberalized rice imports to counter surging rice
prices as part of its September agreement with the IMF.

Starting Sept. 22, private companies were allowed to import
rice and exempted from import duties. (gis)