Poor to receive cooking oil subsidy

The Jakarta Post , Jakarta | Thu, 08/23/2007 1:23 PM | Business

The Jakarta Post, Jakarta

The government plans to provide subsidies amounting between Rp 50 and 100 billion (US$10.6 million) each month for poor households to buy their needs of cooking oil, whose prices have been on the rise lately.

The subsidy fund would be used to provide up to two liters of cooking oil on lower-than-market prices to the households every month, the Trade Ministry said.

It is planned to come into effect by September.

""The concept of the subsidized cooking oil will be similar to that of subsidized rice for poor households,"" the trade ministry's Director General for Domestic Trade Ardiansyah Parman told detik.com Wednesday.

The planned cooking oil subsidy was proposed in a meeting late Tuesday with Coordinating Minister for the Economy and the State Logistics Agency (Bulog) to improve the distribution of cooking oil, Ardiansyah said.

It was suggested Bulog would distribute the subsidized cooking oil, along with the subsidized rice, which it already manages.

Ardiansyah said the price of the subsidized cooking oil may be around Rp 3,000 per liter, which was affordable for poor households.

He said the subsidized cooking oil should be distributed by next month, in time for the Islamic fasting month of Ramadhan when food prices usually pick up.

Trade Minister Mari E. Pangestu said the prices of staple food may rise by 5 to 10 percent, because demand usually increased by 10 to 20 percent during the fasting month and the Idul Fitri holidays, which marks the end of Ramadhan.

The market price of cooking oil itself has continued to creep up, reaching Rp 9,000 a liter -- higher than the government's expected stable price of between Rp 7,000 and Rp 8,500.

The price increase was suspected to be the result of a recently growing global demand for crude palm oil (CPO), of which cooking oil is derived from.

CPO is also used for the production of soap and detergents, as well as biofuels.

With Indonesia being a major exporter of CPO, and rising demands for the commodity pushing up its prices to US$700 a ton, local producers may lean toward export markets, rather than supplying the domestic market.

Suspected hoarding and poor distribution has only worsened the situation for cooking oil prices.

The government had in June increased the export tax for CPO to between 6.5 percent and 10 percent, as part of efforts to ensure more domestic supply.

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