CPO producers to assist Bulog in market operation

CPO producers to assist Bulog in market operation

JAKARTA (JP): The National Logistics Agency (Bulog) has
announced that starting from the middle of next month, all crude
palm oil (CPO) producers in the country are required to allocate
part of their production for its market operations.

Bulog's chief, Beddu Amang, said the decision was made during
a joint meeting on Friday between the agency, the Ministry of
Agriculture, the Ministry of Industry and the Federation of
Edible Oil and Fats Association, Antara reported over the
weekend.

The move is expected to gradually cut back local cooking oil
prices by Rp 100 (4.46 U.S. cents) to bring the price down to Rp
1,410 per kilo by September from the current range of Rp 1,547
and Rp 1,600.

He said the market operations are also expected to cut large-
scale vendors out of the distribution line, bringing products
directly from producers to small-scale vendors and retailers.

Beddu said the market operations will involve a buffer stock
of 75,000 tons of CPO, which is expected to come from
installments made by state-owned and private palm oil
plantations.

Bulog, which was set up to manage the distribution of basic
food commodities and maintain their prices at reasonable levels
through market operations, was unable to prevent cooking oil
prices from soaring earlier this year.

The prices escalated last year despite the agency's market
interventions and a raise in CPO export taxes, which were meant
to stabilize domestic prices, encourage investment in palm oil
plantations and protect local producers of cooking oils.

Indonesia plans to boost palm oil production to seven million
tons by the year 2000 at its plantations which have grown from an
area of 405,646 hectares in 1983 to 1.6 million hectares by the
end of last year.

Exemption

Beddu Amang said that private companies providing CPO for
nucleus estate and small-holder projects will be exempted from
having to allocate part of their production for the agency's
buffer stock.

The policy will be applied to other private firms with the
size of contribution based on the size of their plantations.

Beddu Amang said that if the agency's market intervention
fails to stabilize prices, imports of CPO will be allowed, in
spite of their higher prices. World market prices are Rp 100 to
Rp 200 per kilo higher than the domestic market price.

Cooking oil from Malaysia currently costs about Rp 1,687 per
kilo, he said.

The agency usually allows imports during peak demand in the
Idul Fitri and New Year holiday seasons. Imports reached 96,000
tons in 1992 and increased the next year to 112,000 tons, but
dropped to 109,000 tons in 1994.

He estimated that Indonesia's CPO production will reach four
million tons this year, of which 2.5 million tons are for
domestic consumption.

Indonesia's CPO exports increased from 683,000 tons in 1990 to
1.2 million tons in 1993, but declined by about 55 percent to
773,000 tons last year. Cooking oil exports rose from 45,000 tons
to 69,000 tons before slightly declining to 65,000 tons in the
same period.

Responding to questions about the World Bank's analysis that
Bulog had escalated the country's food prices to make them higher
than world prices, Beddu said that unlike the actions of private
sector monopolies, which seek profits, Bulog's monopolistic
practices are aimed "for the benefit of the people".

He said that higher prices on the domestic market were needed
to protect farmers.

If that protection was eliminated, he said, farmers would not
feel encouraged to produce optimally. Among the commodities which
still need protection are soybeans, he said.

Earlier last week members of the House of Representatives
expressed concern over the low prices that farmers received from
Bulog for their rice compared to the price offered by private
vendors.

They said that several farmers received only Rp 657 (30 U.S.
cents) from Bulog, far lower than the Rp 750 offered by private
vendors. (pwn)