Indonesia's rice market is nervously waiting for the government's final decision on an import tariff while players' reluctance to sell their stocks has triggered price hikes, traders said yesterday.

Agriculture Minister M Prakosa told reporters yesterday: "We are still calculating it by using certain formulae. The tariff will adjust to world prices, the rupiah rate, domestic production and consumer welfare.

"It will also be adjusted to the regional minimum wage," he said, adding that the tariff, seen by grain traders to be up to 35%, was expected to boost the income of small farmers.

Traders also said the tariff would be favourable for farmers, but added it would spark rises in prices for the staple in the world's fourth most populous country.

"This is a tough issue. We are confused because we can't make any future plans," said one trader in Surabaya, the provincial capital of East Java. "If I release my stocks now, there is a danger the tax will be high. Then I will lose money.

"These days, traders only wish to sell their stocks in small quantities. Those who have 100 tonnes, for example, will only release 25 tonnes to the market." Government officials said the tariff was expected to cut imports. But traders said a high import tariff would also boost prices of local grain because there would be less rice in the market.

Officials have said the tariff was expected to take effect after the Muslim Hari Raya celebration in January and would be included in the next letter of intent with the International Monetary Fund.

Traders said prices of 25% broken rice, the type mainly consumed by Indonesians, rose to 1,750 rupiah/kg this week compared with 1,650 rupiah/kg last month. Prices are expected to rise again ahead of the celebrations because demand traditionally grows, traders said.

But a trader in Jakarta said despite uncertainty over the import tax, the government had made sure stocks would be enough to meet demand ahead of the celebrations.

"Bulog says stocks are sufficient," said the trader, referring to the state commodity regulator. "It will not hold new tenders in the near future because it doesn't have enough money, but it will invite private traders to sell their rice through some kind of closed tender."

Bulog's last open tender was in August this year when it bought 75,000 tonnes of Chinese rice at US$195, US$200 and US$205 a tonne including freight. The government allowed private traders to import rice for the first time in 1998 in line with an agreement with the IMF. Imports used to be a monopoly of Bulog.