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)