'Subsidies given occasionally to flour industry'

'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)