Tue, 09 Nov 1999

HKTI backs 25% hike in rice price

YOGYAKARTA (JP): The Association of Indonesian Farmers (HKTI) urged the government on Monday to increase the price of rice by at least 25 percent from about Rp 2,400 per kilogram.

HKTI chairman Siswono Yudhohusodo said the price hike was needed to offset farmers' higher spending on fertilizer.

The increase in the price of the fertilizer, particularly since the government lifted the subsidy on fertilizer sales late last year, made the current rice price unrealistically low, he said.

"With a higher price of rice, farmers will be able to earn a better margin and get a better living, too," he said on the sidelines of a seminar on traditional farming held by Gajah Mada University.

The rice price is determined by the market but the government sets the floor price for the State Logistics Agency (Bulog) to purchase unhusked rice from farmers.

Siswono, the owner of a real estate developer and former minister of transmigration in the Soeharto administration, said the current rice price of Rp 2,400 (about 35 U.S. cents) per kilogram was so low that farmers could not get a sufficient margin.

Based on an assumption of the country's total rice production of 30 million tons, the 25 percent hike, or about Rp 600 per kilogram, would enable local farmers to increase their total income to up to Rp 18 trillion, Siswono said.

HKTI also sent a letter to the government asking for the application of a 50 percent import duty on rice.

Siswono said the import duty was needed to narrow the price gap between local and imported rice.

He said imported rice, about 100,000 tons of which are shipped in from Vietnam and Thailand each month, sold for cheaper prices and consequently hurt local farmers' income.

"I believe President Abdurrahman Wahid can understand the problems encountered by local farmers, some of whom are actually members of the President's organization Nahdlatul Ulama," he said.

Newly appointed Minister of Industry and Trade Yusuf Kalla said last week the government was considering imposing a 30 percent to 35 percent import duty on rice as part of its next letter of intent to the International Monetary Fund (IMF).

The tax is one of several options being considered to cut the price gap between local and imported rice.

The government liberalized rice imports in September last year to counter surging rice prices in the local market as part of its agreement with the IMF.

However, the recent strengthening of the rupiah made imported rice cheaper than local products.

Under the regulation, private companies are permitted to import rice without having to pay import duties.

The country's imports of rice are estimated to reach 1.5 million tons this year, far below last year's figure of 4.8 million tons.

It imported 4.8 million tons of rice in the 1998/1999 fiscal year ending March 31 because of a series of harvest failures which were largely attributed to bad weather.

The country's annual rice demand was estimated to be 32 million tons, including 27 million tons for consumption, three million tons for industrial use and two million tons as a reserve for Bulog.(44/cst)