Clove trade's monopoly still needed, Hutomo says

JAKARTA (JP): Clove Marketing and Buffer Stock Agency (BPPC) chairman Hutomo Mandala Putra said yesterday that the agency's clove trading monopoly was still needed to protect farmers' interests.

Hutomo, President Soeharto's youngest son, said BPPC was actually ready to hand over the trade monopoly to the Confederation of Primary Cooperative Associations (Inkud), but the latter was not ready yet as it was still dogged by problems related to the mismanagement of a huge fund.

"If the clove trading rule (monopoly) is abandoned now, I'm sure farmers' cloves to be harvested next year would not be absorbed by the market, as BPPC already has a stock of 164,000 tons," Hutomo said at a workshop on clove trading.

By the end of this year, Hutomo said, BPPC would add another 52,000 tons to its stock, making it enough to supply the needs of clove-blended cigarette producers until the end of 1999, assuming that domestic clove demand remains stable at some 100,000 tons per annum.

Meanwhile, clove production, after declining for the past two years, would rise again in the next two years to over 100,000 tons per annum, he said.

"Since the current stock can satisfy total consumption needs until early 2000, it means the new clove harvests of 1998 and 1999 cannot be sold out. And clove prices are most likely to fluctuate sharply in the coming years," Hutomo said.

He suggested that the intensification and rehabilitation of clove trees be reconsidered to achieve a balance between supply and demand.

Last year, the government launched a massive controversial clove conversion program to reduce the oversupply of cloves. The program, proposed by BPPC, was met by strong opposition from farmers.

Last August, the government decided to stop the conversion of clove trees into other crops as cigarette makers' demand for the spice was unexpectedly on the rise.

The government estimated that clove consumption by cigarette producers could climb to 115,000 tons this year, up from 95,780 tons last year.

Data at BPPC shows that the agency had sold 102,000 tons of cloves to cigarette producers in the last 11 months.

BPPC has been in the spotlight as it is now the only private institution given a commodity trading monopoly by the government.

BPPC was granted the clove-trading monopoly in early 1991. Since then, farmers have been obliged to sell their cloves to the agency, through village cooperatives, and producers of clove- blended cigarettes have had to buy their cloves from the agency.

The government set the floor price for standard-quality cloves at Rp 8,000 (US$1.50) per kilogram.

However, farmers only receive Rp 5,000 per kilogram for the cloves they sell to BPPC. The agency keeps the remaining Rp 2,000 as equity shares in cooperatives and transfers Rp 1,000 to a special account for crop diversification funds.

BPPC sells the cloves to cigarette producers at a far higher price, ranging from Rp 10,000 per kilo for small producers and Rp 12,000 for large producers.

Hutomo said the selling price of BPPC's cloves was Rp 9,600 per kilo plus certain interest rates, which made the selling price different from time to time.

Hutomo also disagreed with the accusation that his agency held a trading monopoly in cloves, because since 1994, it had not purchased cloves directly from farmers, but from Inkud.

"So the criticism toward BPPC is misdirected as all clove purchases are conducted by cooperatives. Yes, there are problems with cooperatives, like collusion between cooperative officials and traders," Hutomo said.

At yesterday's workshop, some clove farmers complained that they could not sell cloves to cooperatives because their produce was of low quality or the cooperatives had no cash on hand.

They said they were forced to sell their product to brokers at much lower prices, mostly below Rp 3,000 a kilo.

Responding to the complaint, Hutomo said cooperatives should have had the money in hand before clove harvests and therefore Inkud should have directly transferred the money to village cooperatives' accounts.

Hutomo said funds collected from farmers, Rp 2,000 a kilo, for equity participation in their cooperatives, had reached Rp 1.1 trillion as of the end of last month, which was now being held by Inkud.

But reports have said there was suspected embezzlement of at least Rp 210 billion at Inkud, making it difficult to disburse the farmers equity participation funds to each village cooperative.

Hutomo said the problems currently dogging Inkud made it difficult for BPPC to transfer the clove-trading monopoly to Inkud.

"BPPC is ready to transfer the clove trade (monopoly) to Inkud, but Inkud is still consolidating due to its current problems. If it's forced to take responsibility, I'm afraid the farmers would be the most affected," Hutomo said. (rid)