Higher floor price won't improve farmers welfare

Adianto P. Simamora, The Jakarta Post, Jakarta

Agriculture experts have said that a 13 percent hike in the floor price of unhusked rice will not necessarily benefit local farmers, amid fears of a massive inflow of cheaper imported rice.

Pantjar Simatupang of the Center for Social and Economic Research said that the higher benchmark price would persuade importers to purchase more cheap rice overseas, which, in turn, would put downward pressure on the price of the commodity here.

"The increase in the floor price of unhusked rice will not be effective in improving farmers' income if the government fails to curb illegal imports of rice," he said.

The government has currently imposed an import tariff of Rp 430 per kilogram (the equivalent of a 30 percent tariff).

The Ministry of Agriculture has proposed an increase in import duty on rice to Rp 735 per kilogram to the finance ministry to help protect local farmers against cheaper, imported rice.

It is not yet clear whether the finance ministry will approve the tariff increase proposal.

President Megawati Soekarnoputri has issued a new presidential directive on rice policy.

Under the directive, the floor price of unhusked rice is now set at Rp 1,725 per kilogram from the previous price of Rp 1,519, while the price of rice was raised to Rp 2,790 per kilogram from Rp 2,470.

The floor price is the reference price level used by the State Logistics Agency (Bulog) to purchase rice from farmers for its reserves.

Farmers will also use the floor price as a benchmark when selling the commodity in the market.

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

The new floor price, however, will only be effective if farmers can meet several qualifications set by the government.

Bulog plans to buy some 2.2 million tons of rice from local farmers this year. It was also expected to import some 800,000 tons of rice to meet local demand.

The government hopes the higher floor price will improve farmers' incomes, particularly since it has increased fuel prices, and electricity and telephone rates.

Bayu Krisnamurti, a director at the Center for Development Studies at the Bogor Institute of Agriculture, said that the higher floor price would not be sufficient to match the higher cost of living triggered by the fuel and electricity price hikes.

"Farmers will continue to be in a difficult position," he said.

Bayu was also worried that farmers could not meet the product quality standards set by the government to be eligible for the higher floor price.

He pointed out that this year's harvest would occur mostly during the rainy season in February and March.

Farmers normally yield their harvest in January. The delay was mainly due to the months of drought last year, which had forced farmers to delay planting their crops.

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

Indonesia gained rice self-sufficiency status in 1984, but since then output has been on the decline for a variety of reasons and imports have continued to rise.

The country's unhusked rice output this year is projected to reach about 52 million tons.