State firms to sell cement below govt-set prices
State firms to sell cement below govt-set prices
JAKARTA (JP): State-owned trading companies assigned by the government to import cement to help stabilize prices on the domestic market said yesterday they would sell their cement below the newly-raised reference prices.
Benarto, president of PT Dharma Niaga, told a press conference yesterday that his company and three state-owned trading firms -- PT Tjipta Niaga, PT Kerta Niaga and PT Mega Eltra -- would sell imported cement of first quality at Rp 6,820 (US$3.07) per 40 kilogram sack.
"That's a warehouse price. If you consider that the transportation cost of bringing cement from our warehouses to consumers will be between Rp 400 and Rp 500 per sack, our retail prices will be still far below the new local reference prices," Benarto said.
The government, under a ministerial decree, increased the local reference prices of cement by 40 percent last month. In Java, for example, the reference price is set at Rp 8,290 per sack and in Irian Jaya at Rp 11,970. The decree also sets the factory price of cement at Rp 6,350 (excluding sales tax) for Java.
Benarto said that the four state-owned trading companies would sell cement below its reference prices until the end of this year.
"I can guarantee that because we have signed one-year contracts with cement producers in China and North Korea," Benarto said.
Minister of Trade Satrio B. Joedono said earlier this week that he had instructed the four trading companies to import between 1.5 million and two million tons of cement this year. Of the total amount, Dharma Niaga will get the largest portion, at least 1.1 million tons.
Import
Benarto said yesterday that during the first quarter of this year, the four state companies imported 220,000 tons of cement, of which 92,000 tons have been sold out.
"We still have some 120,000 tons at our warehouses in Jakarta, Semarang, Surabaya, Palembang, Bandar Lampung and Medan. In Jakarta alone, we still have some 30,000 tons," Benarto said.
He said that the four trading companies sell their cement directly to construction contractors and developers, mostly small ones, and other to consumers who wanted at least one truckload of cement.
The government's decision to increase reference prices of cement by about 40 percent has sparked speculation at market places, pushing prices above the set prices in a number of cities.
Minister Joedono said that the government would not penalize parties who violate the government's set prices. But the government encouraged imports of cement to stabilize local prices, he said.
He said the price increase was intended to allow companies to import more cement, whose tariff has been reduced to zero, and to encourage existing producers to make new investments for plant expansion.
A number of critics have said that the 40 percent increase is too high because, they claim, even with the old reference prices, which were introduced in early 1993, cement producers were still able to make healthy profits.
Sudwikatmono, president of the country's largest cement producer, PT Indocement Tunggal Prakarsa, said yesterday that the 40 percent increase was not too high but, rather, just sufficient to encourage reinvestment in the cement sector.
When asked if his cement company would use the profits for reinvestment, Sudwikatmono did not answered directly, saying that his company might look at other sectors which are more attractive.
Besides cement, the Indocement Group's business lines include food and property. In the food sector, the group has PT Indofood Sukses Makmur, the country's largest processed food manufacturer, and PT Bogasari Flour Mill, the country's only flour milling firm.
Minister of Industry Tunky Ariwibowo said yesterday that the government could not force the existing cement producers to use their huge profits from the 40 percent price increase for reinvestment in the cement sector.
"It's up to them because they are the ones who have the money. We cannot dictate what they should do with their money," Tunky said after attending a promotion on the third Exhibition of Indonesian Industrial Products.
"What we can do is lure them to invest in the cement sector by increasing reference prices. If the cement sector promises better returns, they will automatically invest in the sector," Tunky said. (rid)