Govt faces hurdles in distributing cooking oil

JAKARTA (JP): The government has admitted that obstacles in the cooking oil distribution chain are still hampering efforts to stabilize the price and ensure a constant supply of the essential commodity.

Minister of Industry and Trade Rahardi Ramelan said on Friday that market distortions were thwarting the ministry's attempts to keep the price of cooking oil affordable for all Indonesians.

He was responding to reports that some retailers were continuing to sell cooking oil at prices of up to Rp 2,000 higher than the Rp 4,000 per kilogram ceiling price set by the government.

The Joint Marketing Office for Farm Products (KPB) decided recently to buy cooking oil from the Association of Indonesian Edible Oil Industries (AIMMI) and sell it directly to cooperatives at Rp 3,500 per kilogram.

The cooperatives are supposed to then sell the cooking oil for Rp 4,000 per kilogram in the city's markets.

The measure replaced a system under which the marketing office and plantation firms had to sell crude palm oil (CPO) to the State Logistics Agency (Bulog). The agency is notorious for its inefficiency and the lack of transparency in its distribution network.

Bulog then sold the CPO to several appointed refineries where it was processed into cooking oil before buying it back as a finished product and distributing it on the domestic market.

Despite a cut in the number of links in the distribution chain, the price of cooking oil had continued to remain above the official ceiling price, the minister said.

Last week, the joint marketing agency supplied 22,500 tons of cooking oil to Jakarta. The shipment will satisfy demand for at least 35 days, he said.

"600 tons of cooking oil a day should be enough to meet the daily demand in the city, unless people are withholding large amounts," he said.

Sources said that many big retailers were withholding cooking oil to prop up prices and increase the profit margin made on sales.

The minister said that cooperatives were not capable of influencing the market price because their distribution capacity was a mere 50 tons a day.

They also do not have a sufficiently large cash flow to be able to hoard a large volume of cooking oil for a long time, he said.

Rahardi said the ministry was preparing a permanent distribution system for essential foods, including rice, sugar, cooking oil, soybean and corn.

The system will use the retail sector as the focus of local distribution.

He reiterated that measures taken recently to facilitate the distribution of essential commodities were temporary and transitional in nature.

"We are developing a new standard mechanism for distribution which will be finished in one or two weeks," he said.

He said the cooking oil market would be controlled through the use of an export tax which would be adjusted to accommodate fluctuations in domestic and international CPO prices and in the rupiah-U.S. dollar exchange rate.

The new mechanism would not discriminate against private palm oil producers in favor of state-owned companies, he said.

Rahardi said the international price of CPO was currently much higher than domestic prices which encouraged many companies to export their produce, despite the high export tax. (das)