Jakarta – The government has begun transferring cash to around 20.7 million families around Indonesia, weeks ahead of the Islamic holiday of Idul Fitri, to help them afford cooking oil, which had doubled in price in the past few months.
The cooking oil direct cash assistance (BLT) program would pay each family Rp 300,000 ($21), supposedly covering three months' worth of their cooking oil expense. The government has earmarked Rp 6.9 trillion for the program, taken out from year's Rp 455.6 trillion Covid-19 relief budget.
President Joko "Jokowi" Widodo has instructed his aides to complete the cash transfer before Idul Fitri, which falls on May 1.
"According to the president's instruction, the cooking oil BLT must be distributed during Ramadan. Even, it must finish one week before Idul Fitri," Susiwijono, the Coordinating Ministry for Economic Affairs secretary, said on Friday.
"This cooking oil BLT is part of the national economic recovery program, or PEN, and uses the 2022 PEN budget," Susiwijono said.
Among the recipients were 18.8 million families currently registered under the government's non-cash transfer food assistance (BPNT) program and an additional 1.85 million families registered under Family Hope, a conditional cash transfer program, but not in BNPT. The government earmarked Rp 6.19 trillion for them, Susiwijono said.
Also, there would be an additional Rp 750 billion cash transfer for 2.5 million street vendors, food-stall owners, and fishers, Susiwijono said.
He said the Ministry of Social Affairs would organize the disbursements for food assistance recipients. Meanwhile, the Indonesian Military (TNI) and the National Police would manage the distribution of cash transfers for the street vendors, food-stall owners, and fishers.
Isa Rachmatarwata, the director-general of the budget at the Ministry of Finance, said the cooking oil direct cash assistance was not intended to control inflation. Instead, it was a response to the inflation, which rose to its highest level in more than two years last month.
"We are trying to respond appropriately," Isa said, adding that the government may extend the program in July. "Many things are uncertain. We may need to respond with an extension, or maybe it is enough for just three months," Isa said.
Last month, Indonesia's annual inflation reached 2.64 percent, the highest since December 2019 and accelerating from 2.06 percent in February. The Central Statistics Agency noted spiking cooking oil prices were the main driver for the acceleration.
A liter of cooking oil fetched around Rp 23,800 today, 76 percent higher than Rp 13,500 a year ago, in line with the global crude palm oil price increase.
The government's previous intervention by setting a ceiling price for cooking oil backfired, with supplies disappearing from the market. So, last month it revoked the price cap, and the cooking oil returned to the store shelves overnight, albeit at a higher price.
Chatib Basri, an economist from the University of Indonesia, said earlier that the government made the right decision to let the market determine cooking oil prices and subsidized the poor with cash transfers to ease the price increase impact on their livelihood.
"Price control won't work anywhere. That is the first lesson of economics, never control the price. If the price is set below the production cost, the goods will disappear," Chatib said.
"So, the government's steps are correct. Let prices follow the market and then provide the BLT," he said.