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n its defense following a recent raid, rice-trading company PT Indo Beras Unggul (IBU) has denied allegations of fraud by selling medium-quality rice as premium rice at inflated prices.

The firm claimed on Sunday that in carrying out its business, it complied with prevailing rules.

The National Police raided a warehouse in Bekasi, West Java, and confiscated 1,160 tons of rice stored by IBU, a subsidiary of publicly listed company PT Tiga Pilar Sejahter Food, on Thursday.

The police are probing the firm, which is accused of deceiving consumers by selling medium-quality rice, the production of which is subsidized, as premium rice branded as Maknyuss and Cap Ayam Jago at Rp 13,700 (US$1.03) and Rp 20.400 per kilogram, respectively — much higher than the price set by the government of Rp 9,000.

IBU spokesperson Jo Tjong Seng said it bought rice from farmers near its warehouses in Bekasi and Subang West Java, as well as in Banten, at the farmers’ selling price as set by the government, although it could go higher depending on the rice quality.

“As far as we are concerned, there are no regulations stating that we cannot buy rice from farmers who use subsidized fertilizers,” Jo said, adding that the premium rice was processed in its own rice mills to comply with Indonesian National Standards (SNI).

The alleged fraud was revealed after the National Police’s Food Task Force examined the level of nutrients in different rice brands. It found that the nutrient in rice distributed by IBU fell short of the standard for premium rice.

National Police spokesperson Rikwanto said in a statement on Sunday that in its production, the rice — grown from the IR-64 variety and its equivalent — enjoyed various subsidies, including for seeds, fertilizer and agricultural equipment. While the company bought the staple food at Rp 7,000 per kilogram, it then “polished” it and sold it at a higher price without adding any nutrient.

“It’s not about whether it’s premium or medium rice, but the high profit margin from the subsidized rice,” he said.

Jo refuted this, saying that the parameters for premium rice were based on its physical appearance rather than rice variety.

“According to the SNI, the parameters for premium rice are based on its appearance, such as color, size, fracture ratio and water content. So, it has nothing to do with rice variety,” Jo said, adding that most rice varieties known for premium quality would be sold as medium-quality if they were not sorted according to
appearance.

Jo added that the company had no control over the price paid by the consumer because it operated through business-to-business arrangements with its partners, based on a reasonable profit.

IBU claimed its monthly production of 4,000 tons was less than 1 percent of the national monthly rice consumption and had no significant impact on national sales.

According to Central Statistics Agency (BPS) data in 2016, total premium rice produced in Indonesia amounted to 201,148 tons, representing 36.23 percent of the total rice milled nationwide.

Business Competition Supervisory Commission (KPPU) chairman Syarkawi Rauf said that although IBU’s market share was minor compared to national sales, further investigation would be needed to check if the company used its allegedly dominant position to control prices.

Based on its study in recent years, rice mills as well as trading are controlled by only a few industry players.

“The government has to use this opportunity to shorten the nation’s lengthy rice-distribution chain, which causes the high rice price paid by consumers,” Syarkawi said.

According to data from the Agriculture Ministry, middlemen and traders make around Rp 186 trillion from rice sales, whereas farmers make only around Rp 100 trillion a year. (dis/lnd)