Govt to probe CPO smuggling

JAKARTA (JP): The government pledged yesterday to investigate the alleged smuggling of crude palm oil (CPO) and its byproducts out of Indonesia in a bid to secure sufficient domestic supply, Minister of Industry and Trade Rahardi Ramelan said yesterday.

"We will take various steps (to probe the smuggling), and we will cooperate with the security apparatus and customs office," Rahardi said after accompanying President B.J. Habibie at a meeting with about 50 major palm oil producers and processors at the Bina Graha presidential office.

During the meeting, the vice chairman of the Indonesian Palm Oil Producers Association (GAPKI), Derom Bangun, told the President to take all necessary measures to curb CPO smuggling because it would disrupt CPO supply to the domestic market.

Bangun, also head of the Team to Stabilize CPO Prices, said exports of CPO, the main raw material for the production of cooking oil, totaled only 400,000 metric tons in the first semester of this year, much lower than the one million tons in the same period last year.

"Despite the lower volume we are all experiencing a shortage in the domestic supply which triggers suspicions about smuggling, or what's defined as "technical exports" by our foreign partners. Therefore the prevention of illegal exports must be intensified," Bangun told Habibie.

During the meeting Habibie was accompanied by six ministers including Rahardi, Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita, and Minister of Cooperatives and Small Enterprises Adi Sasono.

Sinar Mas Group chairman Eka Tjipta Widjaja, and Salim Group Chief Executive Officer (CEO) Anthony Salim were also present.

The shortage of cooking oil has become an acute problem, as private CPO producers, who control 75 percent of domestic production, prefer to export their products to benefit from higher prices overseas.

The government raised the export tax on CPO and its byproducts last month to up to 60 percent from 40 percent to slow down exports. However this has failed to discourage exports and the price of cooking oil has remained high due to the decline in the domestic supply.

The price continues to hover between Rp 5,000 (38 U.S. cents) and Rp 6,000 per kilogram.

The government has also changed the cooking oil distribution system several times recently and has bought the commodity from both private and state-owned producers at the market price and then sold it to cooperatives at the subsidized price of about Rp 4,000 per kilogram. But the uncertainty over the cooking oil price continues.

Habibie said the government planned to give a bigger portion of the cooking oil distribution network to cooperatives and small enterprises to ensure the commodity reaches the consumers.

"In the distribution, we will try to give priority to small companies and cooperatives. If they have not yet mastered (distribution management) please cooperate with them," said Habibie.

The minister of industry and trade, the minister of cooperatives and small enterprises, the state minister of the empowerment of state enterprises Tanri Abeng and the State Logistics Agency (Bulog) chairman Beddu Amang signed earlier in the day a joint decree promoting the role of cooperatives in the distribution of cooking oil.

"The decree will provide some assistance to the cooperatives so they will be ready to take over Bulog's job in the distribution of cooking oil in January," Adi Sasono said.

Rahardi said that government intervention in the domestic and export CPO markets was still needed because the price of the commodity overseas was still much higher than that at home.

Beddu said that Bulog would buy 55,411 tons of cooking oil this week, 30,250 tons of which will come from private companies, with the remaining 25,161 tons coming from state plantation companies PT Perkebunan Nusantara (PTPN) through a tender to boost cooking oil supply.

"The price will range between Rp 4,750 and Rp 4,850 per kilogram, with total transaction value reaching Rp 300 billion," he told journalists at his office.

Beddu said that the agency would hold a tender every Tuesday until the domestic cooking oil price stabilized at between Rp 3,900 and Rp 4,000 per kilogram.

With such a strategy, he said, he was optimistic the cooking oil price would drop to the government's reference level of Rp 4,000. (prb/gis)