Subsidy for flour industry denied
Subsidy for flour industry denied
JAKARTA (JP): Chief of the State Logistics Agency, Beddu
Amang, rejected accusations yesterday that the government has
been subsidizing the country's flour industry.
"Bulog, in conducting its operations, always considers long-
term forecasts and price fluctuations on the international
market. For the flour industry, there are also subsidy funds
which must be taken into account," he said.
Beddu was responding to a study conducted by the Institute for
Development of Economics and Finance (Indef), which accused the
agency known as Bulog of subsidizing the flour industry -- said
to be dominated by the Salim Group, which controls both the
upstream and downstream levels of the wheat industry.
The group dominates Indonesian flour, noodle and biscuit
production.
Indef economists calculated that the import, milling and
distribution mechanisms of wheat and flour have cost consumers up
to Rp 760 billion (US$341 million) in Bulog subsidies to the
flour industry last year from cutbacks on import prices.
According to Indef, Bulog imports wheat at Rp 418 (18 U.S.
cents) per kilogram 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.
Indef suspects that PT Indofood, a noodle producer, and PT
Ubindo, a biscuit factory, which are both part of the Salim
Group, have also been procuring flour at prices lower than the Rp
616 set by Bulog.
Beddu said yesterday that the review failed to incorporate
distributors' "subsidy funds" into the calculations.
"We sell imported wheat to Bogasari at a fixed price of Rp 141
kg, no matter how much prices fluctuate on the world market. But
the losses (due to higher import prices) can be covered by a
fixed subsidy fund of Rp 256 per kg contributed by distributors
or consumers," he said.
Beddu explained that the factory price of Rp 616 per kg
comprises, among others, the Rp 256 per kg subsidy fund,
insurance fees, bank costs, free financing, depreciation costs,
processing, factory profits, taxes and Bulog's management fees.
The Rp 256 subsidy fund, he said, was a fixed sum, "so if
prices on the international market fall, Bulog enjoys a surplus.
But if they are high, we have a deficit or break-even," he said.
He added that so far Bulog has had more surpluses than
deficits. In the long run, he said, deficits due to high wheat
prices in one year could be covered by low prices in another.
Beddu said that currently the Salim Group controls only 19,000
tons, or 10 percent, of the total national flour consumption of
182,000 tons a month.
Indofood, he insisted, obtains its flour from Bulog at the
same price as other companies. (pwn)