Policy on CPO hurts cooking oil producers

JAKARTA (JP): The government's requirement that producers of crude palm oil (CPO) should supply part of their products to the National Logistic Agency (Bulog) has forced most small-scale cooking oil producers in the country to halt operation.

"About 60 percent of cooking oil plants in the country have delayed production due to shortages of CPO supplies," the chairman of the Indonesian cooking oil industry association, Mohd. Nafis Daulay, was yesterday reported by Bisnis Indonesia as saying.

He explained that CPO producers, in a bid to meet the government's demand, have suspended their long-term contracts of supplies for cooking oil producers.

Daulay blamed the obligation to provide Bulog with 75,000 tons of CPO within three months to help it build up its buffer-stock as the main cause of the shortages.

The stock procurement is aimed at cutting cooking oil prices from about Rp 1,550 (70.4 U.S. cents) at present to Rp 1,400 or the same level as that of last January, before the Moslem fasting month.

Daulay said that only a few small-scale cooking oil producers are still operating, including 14 in North Sumatra, eight each in Jakarta and East Java, and one each in Riau and South Sumatra.

Daulay said that Indonesia's cooking oil plants have a total production capacity of 5.6 million tons annually.

Daulay urged that the joint marketing agency reactivate their long-term supply contracts with small-scale cooking oil producers to help them continue operation.

"Hundreds of employees will be fired should the cooking oil producers stop their production for a long period of time," said Daulay. (kod)