Govt cooking oil policy criticized

Govt cooking oil policy criticized

JAKARTA (JP): The current uncertainty in cooking oil prices is
the result of misdirected government market interventions and has
not been caused by the poor distribution system for the
commodity, a senior agriculture analyst has said.

Bungaran Saragih, an economist from Bogor Institute of
Agriculture, said yesterday that government intervention in the
domestic and export markets for crude palm oil (CPO), which is
used to manufacture cooking oil, has caused great uncertainty in
the industry.

"Government intervention has distorted the cooking oil market
and caused price and supply uncertainty," he told The Jakarta
Post.

Cooking oil prices in the country increased sharply in early
January as a result of a scarcity which came about when the
rupiah fell in value against the U.S. dollar, thereby providing
domestic producers with an opportunity to make large profits
through the export of CPO and its derivatives.

To counter this phenomenon the government imposed a 40 export
tax on CPO and its derivatives in April, which was subsequently
raised to 60 percent. However this has failed to discourage
exports and the price of cooking oil has remained high. It is
currently hovering at between Rp 5,000 and Rp 6,000 per kilogram,
despite a government reference price of Rp 4,000 per kilogram.

The government has also on a number of occasions attempted to
alter the commodity's cumbersome distribution system to attain a
more reliable supply, but this too has failed to have the desired
impact on domestic market prices.

Bungaran said the way to stabilize cooking oil prices was to
end government market interventions and allow prices to be
determined by the market.

"It might make domestic cooking oil prices even more expensive
but the government would not have to spend money subsidizing
cooking oil sales," he said.

Customers would then have to decide whether to continue
consuming cooking oil or seek other alternatives, he added.

"Cooking oil should be excluded from the list of essential
commodities because people do not die without it. They can use
other edible oils as a substitute or they can prepare their food
by boiling it or steaming it," Bungaran said.

Bungaran defended private CPO producers who have been
exporting their produce.

"The companies are only doing business, they want to export.
The government's intervention in the cooking oil market helps
consumers, but it is killing CPO producers" he said.

Traders said that cooking oil was selling for between Rp 5,100
and Rp 5,200 per kilogram in Jakarta yesterday. (gis)