State firms obliged to sell CPO to Bulog

JAKARTA (JP): The government has obliged state-owned plantation companies to sell cooking oil produced from crude palm oil (CPO) to the State Logistic Agency (Bulog) in a bid to stabilize domestic prices for the commodity.

A statement issued by the Ministry of Industry and Trade yesterday revealed the sale was made compulsory under the terms of a decree which took effect on July 24.

The decree also obliges state sugar producer PT Rajawali Nusantara Indonesia to sell its entire output to Bulog for similar reasons.

Cooking oil and sugar purchased by Bulog will be distributed on the domestic market to stabilize prices. The agency is prohibited from selling either commodity to large industrial buyers.

The statement said that any violations of the terms of the decree would be punished according to the law.

The decree set a floor purchase price of Rp 2,100 per kilogram for sugar bought by Bulog from farmers and state sugarcane refineries. The floor price came into effect on July 24 and will last for an unspecified period of time. Any future reviews of the level at which it has been set will take domestic and world market prices into account.

The government recently returned the exclusive right to distribute cooking oil on the domestic market to Bulog. Before that PT Dharma Niaga and PT Pantja Niaga were responsible for ensuring the commodity remained widely available to the general public during these turbulent times.

The agency will sell cooking oil to traditional market cooperatives at a maximum price of Rp 4,000 per kilogram, considerably below the price at which the agency must pay to plantation companies.

Traders said that cooking oil was selling for between Rp 5,100 and Rp 5,150 per kilogram in Jakarta yesterday.

Funds raised from taxes on crude palm oil and its derivatives will be used to finance the subsidized price at which cooking oil will be made available to market cooperatives. CPO is the basic ingredient in cooking oil. Unlike, private companies state-owned plantations firms are not allowed to export their CPO products.

Last month the government raised the export tax on CPO to 60 percent to discourage exports and direct more supplies onto the domestic market.

The sharp drop in the value of the rupiah against the U.S. dollar has resulted in a situation where Indonesian palm oil producers can make sizable profits through exporting their produce.

This has lead to a scarcity of supply on the domestic market and has pushed prices up sharply. Bulog has been forced into making bulk purchases of cooking oil to ensure that a steady supply is available to meet domestic needs. (gis)