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)