Wrong Policies and Calculations Lead to Rice Price Anomaly

Penulis: Amal Ihsan Hadian

Editor: Yura Syahrul

15/11/2018, 22.57 WIB

The government argued that the rice price anomaly occurred because many traders turned medium rice into premium rice.

Rice, the staple food

The price of rice continues to rise toward the end of the year, following a supply decline to the Cipinang Rice Market. The government plans to hold market operations and crack down the traders of ‘fake premium rice’ who are blamed for causing prices to soar. In fact, the main problem lies in the government’s mistake in calculating grain production and policies that damage the rice trade system.

Based on data from the Cipinang Central Rice Market (Pasar Induk Beras Cipinang/PIBC), the average price of rice in October was Rp 10,143 per kilogram (kg). Despite sloping compared to the average price at the beginning of 2018, the price is already above the average monthly rice price throughout 2017.

The average price of medium rice has reached around Rp 9,300 per kg. Although it is still within the range of the highest retail price (HET), it is well above the normal range of medium rice price of Rp 8,800-Rp 9,000 per Kg. Medium rice is the most popular type, with the portion of demand reaching 70 percent of the total national rice market.

PT Food Station Tjipinang Jaya (FSTJ) President Director Arief Prasetyo said the price of medium rice rose because the supply to PIBC continues to decrease. Until last October, the composition of the incoming rice supply was 90 percent of premium rice and 10 percent of medium rice, even though the composition at the end of last year was still 70 percent of premium rice and 30 percent of medium rice.

Pasokan Beras

The increased supply of premium rice is allegedly caused by seasonal factors. This is because the quality of grain produced during the dry season is better than those produced during the rainy season, resulting in a smaller level of rice fragments. “So, most of the rice produced has premium quality,” he said.

In order to anticipate the continued decline in supply and help stabilize prices, FSTJ has submitted a request for the delivery of medium rice stocks owned by the State Logistics Agency (Bulog). The request letter was sent through Jakarta Provincial Government to be forwarded to the Minister of Trade.

Meanwhile, the Trade Minister Enggartiasto Lukita claimed to have sent a letter to the Minister of State-Owned Enterprises (SOE) to give Bulog, as the state company in food sector, assignment to carry out market operations. The market operations are deemed necessary to anticipate a surge in rice prices on the market.

The letter to the SOE Minister has been sent since last September in accordance with the decisions of the Limited Coordination Meeting (Rakortas) held at the Economic Coordinating Ministry. Based on the decisions, the price of rice in Java Island is maintained at Rp 4.450 per kg in accordance with the HET, which is stipulated in the Minister of Trade Regulation No. 27/M-DAG/PER/5/2017 on Reference Prices for Purchase at the Farmer level and Reference Prices for Sales at the Consumer level.

The surge in rice prices becomes a serious matter for the government as it can trigger a rise in poverty rates. According to the World Bank Senior Economist Vivi Alatas, a 10 percent increase in rice prices will create 1.2 million new poor people. This is because the portion of expenditure of poor families for rice covers a quarter or 25 percent of total expenditure.

Another problem is that three quarters of Indonesia’s population are net consumers of rice. This means the number of Indonesians who buys rice is higher than the number of those who produce rice. Thus, an increase in the price of rice will cause an increase in the portion of expenditure of poor families. Based on projection from the World Bank, this would make 1.2 million people fall into the poverty line.

According to the Statistics Indonesia (BPS), the number of poor people in Indonesia as of March 2018 reached 25.95 million people, equivalent to 9.82 percent of the total population. The number fell by 633,000 from 26.58 million people in September 2017.

However, Agriculture Minister Amran Sulaiman said there is an anomaly from the current increase in medium rice prices because the rice stocks in the warehouses owned by Bulog and PIBC are deemed sufficient. Despite rising, the current price of medium rice is also still within the range of the HET. Moreover, the upcoming harvest period in January 2019 will also increase the rice stocks.

“We want to convince the public that the food supply is safe. Do not be toyed with it,” Amran said when visiting the PIBC on Thursday (11/8).

Reporter: Michael Reily

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