'Subsidies given occasionally to flour industry'

JAKARTA (JP): A former chief of the National Logistics Agency (Bulog), backing his successor, affirmed yesterday that subsidies to the flour industry were given only on an occasional basis.

"A subsidy for the flour industry is necessary only when wheat prices on the international market are high," said Bustanil Arifin, who headed the agency from 1983 to 1993.

Bustanil, who spoke to reporters after the launching of new low-cost apartments for fishermen in Muara Angke, North Jakarta, added that if international prices were low, no subsidy would be given.

A research recently accused Bulog of subsidizing the flour industry -- currently dominated by the Salim Group which owns upstream and downstream industrial plants -- by up to Rp 760 billion (US$341 million) last year.

The research calculated that Bulog imports wheat at Rp 418 per kg but sells it at only Rp 141 per kg to PT Bogasari (controlled by the Salim Group), which -- together with the Berdikari Group -- has been appointed to process the grain into flour.

Flour produced by Bogasari is then bought by Bulog at a factory price of Rp 616 before being distributed to biscuit, noodle and other flour-based manufacturers, of which the Salim Group is also a major part of.

Price

Following the allegations, the head of Bulog, Beddu Amang, denied that the government had been subsidizing the industry, saying that there were "subsidy funds" collected from distributors and down-stream consumers which covered any price fluctuations that may occur on the international market.

Bustanil said yesterday that the price of imported wheat Bulog charges PT Bogarsari's flour mill, which currently stands at Rp 141 per kilogram, has long been stipulated.

"Apart from that, there are also the subsidy funds which I formulated. At first, the funds were Rp 10 per kg but then they increased to Rp 20 per kg and they are now more than Rp 200 per kg," he said.

According to Beddu earlier this month, the amount of subsidy funds are currently Rp 256 per kg.

Bustanil said that due to high wheat prices on the international market -- caused by long droughts -- the country currently has to subsidize the flour industry.

"But Indonesia's flour prices will not follow the fluctuation," he said.

Ever since the controversy was sparked, legislators and economists have called for more transparency in Bulog and the flour industry.

Legislators have also called on the government to allow more investors to enter the flour industry and boost healthy competition. (pwn)