Bulog to spend $55.5m on CPO procurement

JAKARTA (JP): The National Logistics Agency (Bulog) will spend up to Rp 125 billion (US$55.5 million) on the importation of olein and the procurement of crude palm oil (CPO) from domestic producers in order to amass an edible oil reserve of 75,000 tons.

Bulog Chief Beddu Amang told reporters after meeting with private CPO producers and related government officials yesterday that Rp 90 billion of the funds would come from Bank Indonesia (the central bank) as an interest-free loan.

"Hopefully the olein imports and CPO procurement will be enough to stabilize the price of edible oil on the domestic market without any more government subsidies," he said, adding that the government would also continue to impose taxes on CPO exports and resort to imports whenever it was felt necessary.

He said that between July 2 and July 15 Indonesia imported 19,000 tons of olein and cooking oil from Malaysia -- the world's biggest CPO producer. The imports were unloaded in the ports of Surabaya, East Java (5,823 tons), Cirebon, West Java (4,275 tons), Semarang, Central Java (1,500 tons) and Jakarta (8,000 tons).

Beddu announced earlier this month that a buffer stock was required for market operations aimed at gradually cutting the price of cooking oil to Rp 1,400 per kilo -- the same level recorded before the Idul Fitri holidays in March -- by September.

The current price of cooking oil is between Rp 1,550 and Rp 1,560 per kilo.

Beddu called on both private and state oil palm plantation companies to participate in the building of the buffer stock, with each contributing an equal amount.

The collection of the stock, he said, would be adjusted to the cycle of CPO production. Bulog has targeted the procurement of 20,000 tons of CPO this month, 25,000 tons in August and 30,000 tons in September.

Beddu said that, by retaining a buffer stock of CPO -- the raw material for cooking oil -- cooking oil would no longer be a component that might raise the country's inflation rate.

"Hopefully, it will have a negative effect on inflation and become an affordable commodity for everyone," he said.

Food stuffs currently contribute about two-thirds of Indonesia's inflation rate.

Beddu said yesterday that private producers had agreed to the buffer stock scheme and would supply 37,500 tons, or half, of the 75,000 tons of the planned buffer stock.

The nine CPO producers which have agreed to join in Bulog's market operations are the Sinar Mas group, which will contribute 9,000 tons; the Salim Group, 8,500 tons; Sucofindo, 5,000 tons; Raja Garuda Mas, 3,500 tons; Tolam Tiga Indonesia, 3,000 tons; Lonsum Indonesia, 2,600 tons; Astra, 4,000 tons; Duta Permai, 900 tons and Indecda, 1,000 tons.

Contracts covering CPO prices and the size of the contribution from each producer would be signed today, he said.

"This is expected to bind them to their allocation because, so far, Bulog has only requested that they participate in the market operation," Beddu said.

He said Bulog would purchase the CPO from producers at Rp 1,235 per kilo, including tax, for the buffer stock.

"With the current CPO prices of Rp 1,387 per kilo, private producers will be contributing about Rp 150 for each kilo of CPO," he said.

Tarmizi Rangkuti, vice chairman of the Federation of Vegetable Oil Associations, who also attended yesterday's meeting and press conference, said he hoped that the government would reconsider the level of CPO export taxes after the prices of the commodity came down again.

"As partners of the government, we are willing to join the market operations. However, we hope that the government will review export taxes once prices have improved," he said.

Cooking oil is a primary foodstuff in Indonesia. Two million tons, or 80 percent, of Indonesian cooking oil is made from palm oil, while the remainder comes from coconut oil. (pwn)