Bogasari discounts importing wheat

JAKARTA (JP): PT Bogasari Flour Mills has no plan to directly import wheat despite the removal of the import restriction on the commodity, its director said here yesterday.

Franky Welirang argued that importing the wheat grain would be too expensive for the company given the sharp fluctuation of the rupiah.

In addition, the distribution system of wheat flour, which was previously controlled by the State Logistics Agency (Bulog), remained unclear, discouraging newcomers to enter the retail business of the commodity.

He said Bogasari would operate only as a miller for the time being.

Franky noted that domestic trading of wheat flour had not been wholly deregulated yet even though the government had allowed private companies to import and distribute wheat and wheat flour since February.

All wheat flour production and processed wheat still has to be sold to Bulog, he said.

"Milling others wheat is still more profitable than becoming a trader although the processing fee is very low," Franky told Antara news agency.

He said the processing fee in milling wheat into wheat flour was currently set at Rp 83.7 per kilogram (0.56 U.S cents). It would be raised to 1 U.S cent if domestic trading was wholly freed.

Before Feb. 1, Bulog held a monopoly on the import of wheat and wheat flour, and distribute them to its appointed distributors. PT Bogasari Flour Mills has held the exclusive rights to mill Bulog's wheat into flour since the late 1960s.

Bulog lost its monopoly to import and distribute wheat, wheat flour, soybeans, garlic and sugar from Feb. 1 under the economic reform package agreed to with the International Monetary Fund.

Welirang said that Bogasari meets 80 percent of the country's monthly flour demand of about 250,000 tons. The balance is supplied by PT Berdikari, Danimitra group, Indorama Nusantara and Citra Lamtoro Gung, which is owned by former president Soeharto's eldest daughter Siti Hardijanti Rukmana.

Indonesia relies on imported wheat and wheat flour to meet demand. Bulog said the agency would import 4.25 million tons of wheat flour this year to meet the domestic demand.

Welirang said few private firms had asked for the government's subsidy to import wheat and wheat flour, which is set at Rp 6,000 per U.S dollar, due to the unclear procedures in obtaining the subsidy.

Bulog's chairman Beddu Amang said Tuesday the government would continue to subsidize wheat flour until April 1 next year, instead of lifting the subsidy on Oct. 1 as previously planned.

"The wheat flour price should be set at Rp 4,000 considering the continued fall in the rupiah value. But since the government has decided to subsidize Rp 1,800 per kilogram, we can sell it at Rp 2,200. By extending it, we can raise the price gradually."

He added that Bulog's wheat flour stocks currently stood at 325,000 tons.

Bulog raised the price of flour 86 percent on July 1 to around Rp 2,231 per kilogram from Rp 1,200, to adjust the increase in international wheat flour prices and the sharp depreciation in rupiah's value against the U.S dollar, which had caused the cost of imported wheat and wheat flour to more than triple.

Under the International Monetary Fund's economic reform package for Indonesia in January, it was agreed that all food subsidies would be lifted by Oct 1. But under last month's supplementary memorandum, all subsidies were extended in an attempt to lessen the impact of the worsening economic conditions on the nation's poor.

The IMF and the government predicted that the total subsidy bill would run at 6 percent of the country's gross domestic product. The extension of the subsidies, in part, has led to a projected 8.5 percent deficit in the country's 1998/99 budget. (gis)