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)