Govt to expand subsidized-rice scheme for the poor

Govt to expand subsidized-rice scheme for the poor

JAKARTA (JP): The government is to expand its scheme to
provide the poor with heavily-subsidized rice to cover at least
7.5 million families from next month and will work to ensure the
price of the commodity falls, according to the latest agreement
with the International Monetary Fund (IMF).

"Our program to provide poor families with rice at a
subsidized price which currently covers over 2 million families
will be extended to cover at least 7.5 million families by
October," the government said in the Supplementary Memorandum on
Economic and Financial Policies (MEFP) which was signed on
Friday.

According to the document, the government will allow private
companies to import rice in a bid to increase supplies on the
domestic market. Value added tax on rice will also be suspended.

The document explained that a disappointing second harvest and
panic hoarding had contributed to the sharp increase in rice
prices in recent weeks.

"As a result, domestic market prices are currently close to
international prices. This has made it even more urgent to
shelter the poor from the effect of high prices."

Domestic rice prices have soared to more than Rp 4,000 per kg
in recent weeks, despite government market operations in which it
has been sold for Rp 3,000 per kg.

With almost half of the country's 202 million population
forecast to be living in poverty by the end of this year, more
and more people will become unable to buy rice at current price
levels.

In July, the government launched a program to provide the
country's poorest families with 10 kg of medium-quality rice
every month for Rp 1,000 per kg.

"Because of higher market prices, it has become even more
urgent to supply low-priced rice directly to needy families.
This program is being rapidly expanded with the help of
provincial governors, (and) it may ultimately cover 15 million
families," the document said.

In an immediate response to the rice situation, particularly
the high price level, the government will embark on a seven-point
plan of action.

It explained that in order to stabilize and then reduce market
prices, the State Logistics Agency (Bulog) would substantially
increase the quantity of rice released onto the market at below
market prices and would maintain a higher level of releases until
the main harvest in March and April next year by securing new
import contracts to ensure adequate stocks.

"Also, for the first time in thirty years, we will allow
private traders to import rice," the document said.

Value added tax on rice will be suspended and the government
will continue to provide physical protection to traders,
warehouses and transporters, it added.

The high price of rice has prompted widespread looting of rice
warehouses and trucks transporting the commodity in some parts of
the country.

Early this week, thousands of students staged a major
demonstration to urge the government to cut food prices. The
students also demanded that President B.J. Habibie step down.

IMF Asia Pacific director Hubert Neiss said on Monday that his
monthly review of Indonesia's economic reform program this week
would focus on how to stabilize the price of the commodity.

In an effort to improve the overall food situation, the
government has also ended Bulog's monopoly on the import and
distribution of wheat, sugar and soybeans.

"These commodities will now be imported by the private sector.
We have also recently decided to eliminate subsidies on wheat and
sugar and to gradually phase out the subsidy on soybeans," the
government said in the document, adding that subsidies on the
import of soybean meal, fishmeal, and corn had also been
eliminated.

It explained that although it would have been desirable to
maintain the subsidies amid the current crisis, the benefit to
consumers was being eroded by difficulties in preventing traders
from substantially marking up prices or illegally reexporting the
commodities.

"The removal of subsidies on these commodities means that
existing export bans (except for rice) are no longer relevant and
will be eliminated by September 21."

The government had earlier pledged Rp 15.71 trillion from this
year's state budget to subsidize basic commodities. (rei)