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.