Clove conversion project to cost $174m
Clove conversion project to cost $174m
JAKARTA (JP): The conversion of clove plantations into food
crops will require at least Rp 400 billion (US$173.9 million)
from the farmers' compulsory savings scheme, an official says.
Jaya Putra, the director for cooperative supervision at the
ministry of cooperatives and small enterprises, said the
conversion project was originally expected to be financed by
special conversion funds collected from farmers.
But since the collection of conversion funds only started this
year, while crop diversification has become increasingly urgent
for propping up declining clove prices, it has been decided that
the conversion program should be financed by farmers' compulsory
savings, Jaya said.
He was quoted by Antara as saying that the compulsory savings
would be used for bridging loan finance. He did not elaborate.
The clove trade in Indonesia is currently controlled by the
Clove Marketing and Buffer-stocking Agency which is chaired by
Hutomo Mandala Putra, who is also the chairman of the widely-
diversified Humpuss group.
From 1992 until early this year, the government had required
the agency to pay cooperatives Rp 7,900 for a kilogram of
standard cloves, which have a 10 percent water content and a 3
percent dirt content.
From the Rp 7,000, the farmers received Rp 4,000, Rp 1,900
went to the agency for the farmers' compulsory savings scheme and
Rp 2,000 went to buy compulsory equity shares in farmers' village
cooperatives.
Part of the funds collected under the compulsory savings
scheme were returned to farmers in 1994.
In April this year, however, the regulation was revised
through Presidential Instruction No. 4/1996, which abolished the
farmers' compulsory savings scheme and introduced conversion
funds in an attempt to prop up falling clove prices.
The new ruling fixed prices at Rp 8,000 a kilogram for
standard cloves. The farmers received Rp 5,000 for each kilogram
that they sold to their village cooperatives, the village
cooperatives contributed Rp 2,000 to the National Federation of
Village Cooperatives and the agency retained Rp 1,000 for
"conversion funds".
There is a 20,000 ton a year oversupply of cloves in
Indonesia.
The conversion project is expected to cut back the total area
of clove plantations by 220,000 hectares, from 520,000 hectares
to 300,000 hectares.
According to earlier reports, the agency holds up to 350,000
tons of clove stocks, which equals three years domestic
consumption, mainly by the cigarette industry. (pwn)