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)