Clove price increased

Clove price increased

The government decided last week to increase the producer
(floor) price of cloves by 1.2 percent to Rp 8,000 (US$3.44) per
kilogram from the Rp 7,900 set in early 1992. That measure
followed last month's decision to extend the private sector
monopoly in clove trading for three years.

The increase is obviously negligible, especially in view of
the 34 percent inflation over the past four years. However, the
government claims that the tiny rise will bolster the incomes of
clove growers because of a major change made in the structure of
the new price scheme.

Based on the 1992 regulation, only Rp 4,000 of the floor price
was paid to farmers immediately, while Rp 2,000 was held as their
equity shares in their village cooperatives and the other Rp
1,900 was kept by their cooperatives as compulsory savings. Under
the new price scheme, Rp 5,000 will be paid directly to farmers,
Rp 2,000 will be withheld as their equity shares in cooperatives
and the other Rp 1,000 will be transferred to a special account
for crop diversification funds.

However, judging from the poor performance of the private
clove monopoly over the past four years, we are afraid that the
new price scheme will also remain a theoretical concept, while
the majority of the farmers continue to get much less than what
the government has set. The Directorate General of Plantations
itself admitted last year that the average price obtained by the
farmers during the 1992-1994 period was only Rp 3,700/kg. In
several provinces, the actual producer price was often much below
that average.

Still more devastating is the fact that a great number of
farmers have been disqualified from withdrawing their compulsory
savings because, according to the official argument, they simply
could not fulfill the administrative requirements for the
reimbursement of their savings. But the helpless farmers take the
official argument simply as an excuse for cheating them of their
savings because the requirements were not introduced until about
two years after the collection of the savings began.

Minister of Cooperatives and Small Businesses Subiakto
Tjakrawerdaya himself acknowledged last June that only 24
percent, or Rp 38.2 billion, of the Rp 157.7 billion in
compulsory savings raised from the sales of the 1992 harvest
could be returned to the farmers due to administrative default on
the part of the clove growers. No official explanations have been
made about the accountability for the savings raised from the
1993, 1994 and 1995 harvests.

Minister of Information Harmoko said after last week's cabinet
meeting on economic affairs that the compulsory savings component
was removed from the new price scheme owing to the chaos in the
administration of the savings in the past.

We are deeply concerned over the fate of the estimated one
million clove farmers, who do not have as strong a political
lobby as that exerted by the private monopoly. They may find some
consolation in the fact that now they are no longer required to
put up the compulsory savings. However, they are still forced to
surrender Rp 2,000 of the new price as their equity shares in
cooperatives and another Rp 1,000 to crop diversification funds
in a bid to reduce the clove surplus.

Worse still, there is no guarantee that the farmers will get
the floor price. We also doubt whether they regularly receive
audited accounts of how their equity shares in their cooperatives
are managed.

The farmers' position is strikingly different from the
virtually unlimited leverage held by the private monopoly which,
besides being unaccountable for its performance, is free to set
the sales price of cloves to cigarette companies. Because the
cigarette companies, which account for over 95 percent of the
clove consumption, cannot import nor buy cloves directly from the
farmers or cooperatives, they have to pay whatever prices are
asked by the private monopoly.