T

he state will potentially suffer revenue losses of Rp 1.1 trillion (US$122.1 million) this year after waiving import duties on 57 food-related items in four categories, officials say.

Responding to concerns about confusion over when the tariffs will be suspended, Finance Ministry Fiscal Policy Agency chief Bambang Permadi Soemantri Brodjonegoro said the new regulation on import duties became effective Jan. 24,

“The regulation is aimed at supporting Indonesian industries by curbing inflationary pressures and boosting competitiveness, and most importantly, by providing affordable food prices for Indonesians,” he told a news conference.

Potential losses could be compensated with such benefits, he said, adding “Of course [the regulation] will impact state income, but that’s not the point. Curbing inflation is what matters most for the people’s welfare.”

According to the 2011 state budget, the Rp 1.1 trillion “potential loss” is equal to about 6.15 percent of the nation’s targeted income of Rp 17.9 trillion from import duties this year.

However, Bambang said the new regulation will boost purchasing power, which will increase demand for other import-related industries and in turn result in higher state income.

Customs and Excise Directorate General technical affairs chief Heri Kristiono said the import duty hike for other food items would help compensate for any losses.

“We have increased the import duties of about 1,100 other items,” he said.

A Finance Ministry regulation, effective December last year, stipulates 2,615 items of raw materials, capital goods and finished products would be subject to import duties.

The regulation was revised, waiving until the end of this year import duties for 57 items from four categories — food ingredients, food products, animal feed material and fertilizers — to ensure food security.

Heri said the 57 items contributed about Rp 100 billion in import duties from Dec. 22 to Jan. 23 this year.

Surging food prices resulted in inflation of nearly 7 percent in December last year — a 20-month high.

“We really need to curb food prices because they contribute significantly to inflation,” Bambang said, adding that last year’s inflation rate was partly caused by volatile prices of food commodities such as rice and chilies. The government is eyeing 5.3 percent inflation this year.

Through such a move the government expected that domestic food needs could be met at affordable prices, citing wheat and soybeans as examples of food ingredients for which import duties had been waived, he said.

“We’ve lifted the duty on wheat to reduce the impacts of its surging prices in the world market. A 5 percent duty will likely increase prices of flour and its end products,” he said, adding that the government also removed the duty on soybeans because any supply shortage might hurt small businesses.

Bambang also said that the removal of import duties on fertilizers was expected to enhance the productivity because local fertilizer producers could not provide sufficient supplies. (lnd)