Government to raise rice floor prices

Government to raise rice floor prices

JAKARTA (JP): The government will increase the floor prices of
unhusked rice by at least 10 percent, or by a rate higher than
this year's inflation rate, beginning in the next harvesting
season in February or March.

The chairman of the National Logistics Agency (Bulog), Beddu
Amang, said the increase would be slightly higher than the
country's inflation rate to ensure a higher real income for rice
farmers.

"The farmers' real income should also increase," Beddu told
reporters after speaking at a seminar titled "Identification and
Promotion of Industrial Projects in Harvested Grain".

Minister of Agriculture Sjarifudin Baharsjah said last month
that the government had decided not to raise the floor prices of
rice, at least until the end of the current planting season.

The government usually raises the floor prices at the
beginning of October, when the planting season begins, to protect
farmers from exceptionally low prices.

The new prices usually become effective at the beginning of
the following year.

The current price of unhusked rice, which is Rp 400 (17 U.S.
cents) per kilogram, was announced by the government last
October.

Beddu said the government's decision to delay the announcement
of new floor prices was made to help farmers to benefit greatly
from the new price.

The delay, he said, will also help curb the inflation rate
because the prices of other goods usually start escalating
shortly after the government announces the increase in the floor
prices of rice.

Bulog is charged with maintaining stability in the prices of
several basic food commodities through its marketing monopoly
over foods including rice, sugar and wheat flour.

Beddu said the country's rice stock is now at a healthy level
due to huge stocks held by the public and better harvests this
season.

"Bulog needs only to supply a small amount of rice through
market operations, as compared with last year," he said.

Market operations in the month of October last year were
100,000 tons, but were only 40,000 tons last month, Beddu said.
Meanwhile, rice prices dropped between April and August, but
increased by two percent in September.

Beddu said Bulog's rice stocks were currently 1.3 million tons
-- higher than last year's 650,000 tons.

The large stock, he said, was generated mainly by large
imports this year and the carry-over of last year's imports,
which reached 650,000 tons.

He acknowledged, however, that imported rice, especially from
Myanmar and India, was often of poor quality. He gave assurances
that Bulog would reprocess low-quality rice using blowing
techniques and by mixing the poor-quality grain with better-
quality rice.

Beddu rejected the notion that increasing rice prices would
significantly raise inflation.

"Rice, and food in general, are not the main sources of
inflation," he said.

Instead, he quoted the analyses of economists as showing that
the money supply should be tightened to curb inflation because
too large an amount of money can cause economic overheating
which, in turn, will spur inflation.

According to the Central Bureau of Statistics, the inflation
reached 6.8 percent as of September.

Beddu said a rise in rice prices can be tolerated as long as
the level of the increase is not way above the inflation rate.

Therefore, he added, the rise in rice prices should be
permitted to occur, provided the increase is still equal to or
below the inflation rate.

"As long as rice is made the main scapegoat for high inflation
the farmers will always be the victims," he said.

Beddu said that the only way to improve the welfare of farmers
and to maintain self-sufficiency in rice is to increase the
grain's floor prices, thereby improving the terms of trade of the
rice growers.

"Higher prices of rice mean higher income and better terms of
trade for the farmers," he added. (pwn)