Govt raises purchasing price for rice

The Jakarta Post , Jakarta | Wed, 04/23/2008 1:07 AM | Headlines

After tightening rice export regulation earlier this month, the government raised the purchasing price of rice starting Tuesday in the hope that farmers will benefit from the surge in global rice prices and to discourage smuggling.

Through the State Logistics Agency (Perum Bulog), the government now procures unhusked paddy for Rp 2,200 a kilogram, up from Rp 2,000, unhusked paddy delivered to the agency's storage for Rp 2,840 a kilogram from Rp 2,600 and rice in storage for Rp 4,300 from Rp 4,000.

"The purchasing price increase is designed to protect prices for farmers, who need a lot of support to develop their businesses," said Bayu Krishnamurthi, deputy for agriculture and maritime sector of the Coordinating Minister for the Economy.

Bayu said with the new prices, traders planning to practice hoarding would not be able to compete with what the agency had to offer.

"Last year the price of rice in the market was never lower than the purchasing price set by the government, so we are certain that farmers will benefit most from these new prices" Bayu said.

However, critics believe the government's purchasing price increase has arrived too late for farmers, many of whom have already sold most of their rice to traders.

Critics said the government's purchasing price increase would benefit traders more than the farmers themselves.

As the plan to increase the purchasing price was first announced by the President last week, Bulog had difficulty procuring rice, as traders kept their goods from the market, waiting for a better price to be offered by the government.

Bulog chief Mustafa Abubakar acknowledged that before the President's announcement, his agency was absorbing as much as 27,000 tons of rice, but the figure decreased significantly to 6,000 tons of rice per day after the announcement was made.

"This 6,000 figure was not caused by smuggling, but by the wait-and-see attitude of the traders," Mustafa told journalists in a gathering later in the afternoon.

So far, Bulog has absorbed a total of 1.4 million tons of rice, and is aiming for 2.43 million tons by the end of the year as the country's total rice production is projected to grow by 5 percent from 33 million tons last year.

Trade Minister Mari E. Pangestu said the decision to increase the government purchasing price was inevitable for Indonesia if it was to provide for the domestic supply amid soaring global rice prices.

"In our rice pricing policy, our duty is to keep a balance so that the price is attractive enough for farmers to continue planting rice and also not so expensive for consumers," she said, adding that 60 percent of farmers are net rice consumers themselves.

Rice, the staple food for half the world, is being sold at about US$1,100 per ton or approximately Rp 10,063 per kilogram in the Chicago global market.

The World Food Program said the surge in rice prices may put basic foods beyond the reach of the poorest and raise the risk of a "silent famine" in Asia.

To secure domestic supplies, the government issued a regulation last week, appointing the State Logistics Agency (Bulog) as the sole exporter of rice and setting a minimum three million tons annual rice production surplus as a prerequisite for exports.

Elsewhere, countries such as Haiti and Egypt have been hit by social unrest over high prices for wheat, corn and soybeans, which have also risen to record highs this year. (lva)

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