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.