Bulog to distribute cooking oil again after mayhem

JAKARTA (JP): The government reappointed the State Logistics Agency (Bulog) yesterday to distribute cooking oil on the domestic market, the State Minister of Food and Horticulture A.M Saefuddin said.

Saefuddin said that effective today, state plantation companies would sell their crude palm oil (CPO) to private refineries and Bulog would buy it at Rp 3,400 per kilogram, and then sell it to retailers at Rp 3,900 per kilogram.

"We are trying to set the retail price of cooking oil under Rp 4,000 per kilogram," he said on the sidelines of a meeting with economic ministers.

The minister said that if domestic prices of cooking oil still exceeded Rp 4,000 per kilogram next week, or if domestic supply was not sufficient to meet local demand, Bulog would buy cooking oil produced by private companies at domestic prices or import cooking oil at international prices.

Any subsidies necessary in the procurement of CPO would be financed by the proceeds from export tax on CPO and its byproducts.

"The state minister of the empowerment of state enterprises, Pak Tanri Abeng, said we only need 50 percent of the export tax earnings to finance the imports and the subsidies needed," he said.

Saefuddin said the government had also entirely removed state trading companies PT Dharma Niaga and PT Pantja Niaga from the distribution chain of cooking oil.

"Effective this afternoon, PT Dharma Niaga and PT Pantja Niaga will no longer distribute cooking oil," Saefuddin said.

Saefuddin did not provide any explanation about the change.

The government nullified in May Bulog's role in the distribution of domestic cooking oil and appointed state trading companies to distribute the government's subsidized cooking oil.

Bulog has long been criticized for inefficiency and nontransparent practices in distributing cooking oil.

On Feb. 1, the agency lost its monopolies to import and distribute several important commodities under an economic reform program agreed with the International Monetary Fund (IMF). It still controls the market for rice.

Previously, Bulog was the sole distributor of many essential commodities, including sugar, wheat and wheat flour and soybean.

Last month, the government also required state plantations to supply the domestic market and stop exporting any CPO and its byproducts.

Local CPO producers continue to export their CPO to international markets to benefit from higher prices resulting from the sharp depreciation of the rupiah against the U.S. dollar.

CPO currently is traded for between $600 and $700 per ton on the international market.

Saefuddin confirmed that he had met with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita and Bulog's head Beddu Amang a day earlier to discuss the cooking oil shortage on the domestic market.

He said there were three options on the table now, to ban exports, to buy all CPO from local producers at a reasonable price or to import at international prices using the proceeds of export taxes.

"Banning CPO exports is still a possibility," Saefuddin said.

The government raised the export tax on CPO to 60 percent from 40 percent earlier this month in a bid to discourage producers from exporting and to meet the shortfall on the domestic market. But the higher tax has not been effective in stopping exports.

The higher tax has also been ineffective in reducing the domestic price of cooking oil. Cooking oil is currently being sold at over Rp 7,000 per kilogram on the domestic market.

Meanwhile, Minister of Trade and Industry Rahardi Ramelan, who also attended yesterday's meeting, said the government had no plans to ban the exporting of CPO and its derivatives.

"I have no plans to ban CPO exports right now," he said.

He refused to reveal the results of the meeting, saying that it focused on the distribution of cooking oil and sugar. He said the new distribution scheme would be announced to the public next Tuesday.

Indonesia, the world's second biggest CPO producers, is expected to produce 5.9 million tons of CPO this year. Annual domestic consumption is a staggering 3.2 million tons. (gis)