Govt to start subsidizing cooking oil and soybeans

Abdul Khalik , The Jakarta Post , Jakarta | Thu, 03/13/2008 1:31 AM | Headlines

The government launched Wednesday a market intervention program to help low-income families buy cooking oil and soybeans -- two primary commodities affected by soaring global prices.

For the next six months, the government said it would allocate Rp 500 billion (US$54.3 million) for each of the commodities, or around Rp 2,500 for a kilogram (kg) of cooking oil and Rp 1,000 per kg of soybean.

The programs were announced after Coordinating Minister for Economy Budiono and Finance Minister Sri Mulyani Indrawati and other related officials met with Vice President Jusuf Kalla.

"As of today, we will begin selling the two subsidized commodities in markets across the country," said Bayu Krisnamurthi, deputy minister of agriculture and fisheries for the Office of the Coordinating Minister for the Economy.

"We will use the current mechanism to decide who will be entitled to buy the commodities."

The government would also increase rice provisions for underprivileged people to 15 kg per family per month, from the current 10 kg per family per month.

Bayu said the subsidy would take affect across provincial levels.

The subsidy is the latest effort to curb the impact of increasing prices of global commodities.

Confronted with a lack of coordination and drive from government officials to develop the agriculture sector, Indonesia has become vulnerable to global commodity price fluctuations, analysts said.

For soybeans alone, the country has to import around 70 percent of its needs -- mostly from the United States.

Last month, the government introduced a new policy that included import duty exemption for staple foods, and Rp 3.6 trillion worth of subsidies for other staple foods, in a bid to ease soaring prices.

According to Bayu, the government would in total spend around Rp 12 trillion to finance subsidies this year.

"We have the money ready to finance these programs," he said.

The government will also tighten supervision around businesspeople engaged in providing cooking oil and crude palm oil.

There were indications many businesspeople had stockpiled the commodities to profit from future higher prices, Bayu said.

Some businessmen were jailed after authorities caught them trying to smuggle the commodities.

"Immigration officials recently detained a businessman trying to smuggle out 3,000 kg of cooking oil," Bayu said.

"This case has forced us to boost supervision on businesspeople."

The government would not hesitate to bring the smugglers to justice and revoke their operating licenses, Bayu said.

Indonesia had managed to stabilize prices of staple foods with an average 3 percent drop in both cooking oil and soybean prices, compared to previous weeks.

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