Govt plans raising floor price of rice, import tariff

Govt plans raising floor price of rice, import tariff

The Jakarta Post, Jakarta

The Ministry of Agriculture has proposed to the Ministry of
Finance a 15 percent hike in the floor price of unhusked rice to
help rice farmers cope with rising production costs, interim
minister M. Prakosa said on Thursday.

Speaking during a hearing with House of Representatives
Commission III on agriculture and forestry, he said that the
ministry had also proposed raising the import tariff on rice to
Rp 753 per kilogram from the current Rp 430 in a bid to protect
local farmers against cheaper imported rice products.

Prakosa said that the two proposed policies were aimed at
providing incentives for farmers to maintain rice farming, a
crucial step toward achieving national food security.

Rice is a strategic commodity because it is the main staple
food of the country's more than 210 million population.

Farmers have been demanding a rise in the floor price of
unhusked rice since earlier this year on the grounds that input
costs, including labor, fertilizer and pesticides, have already
increased.

The floor price is the price used for rice procurement by the
State Logistics Agency (Bulog), which buys rice from farmers as
part of its rice stockholding program.

The current two-year-old floor price has been set at Rp 1,519
per kilogram. If the 15 percent price increase proposal is
approved, the new floor price would be Rp 1,745 per kilogram.

It is not yet clear whether the finance ministry will approve
the price hike proposal. An increase in the price would lead to
a higher price of rice in the market, which, in turn, could push
inflation up. The government and Bank Indonesia have been trying
hard to curb inflationary pressures to allow the central bank to
lower its benchmark interest rate so that the burden on the state
budget in covering the interest on government bonds could be
lowered.

Senior official at the Ministry of Agriculture Achmad Suryana,
hoped the above two policy proposals could be decided next month
and become effective early next year.

Ministry of Agriculture officials have long campaigned for a
higher import tariff on rice amid growing imports of cheap rice
products.

Minister of Agriculture Bungaran Saragih, who is currently on
an overseas trip with President Megawati Soekarnoputri, has said
that the current Rp 430 tariff per kilogram of imported rice (the
equivalent of a tariff of about 30 percent) was the lowest in the
region.

Rice imports have been hurting local farmers, which, in turn,
would further discourage them from planting rice.

Because rice is a strategic commodity, the government is
determined to boost local rice output to ensure national food
security.

Indonesia gained rice self-sufficiency status in 1984, but
since then output has been on the decline for various reasons,
including the loss of paddy fields in rice production centers of
Java.

The country's unhusked rice output this year is projected to
reach 52 million tons, while Bulog is set to import some 1
million tons of rice this year.