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Dissecting the dilemma behind govt's rice import policy

Tempo - March 27, 2023

Riri Rahayu, Jakarta – The Indonesian Political Economy Association (AEPI) agricultural observer Khudori on Monday assessed the government's decision to import two million tons of rice amidst the country's harvest season as a bitter decision.

"Import permits issued during the main harvest are very rarely conducted because during the main harvest, the supply of rice grains is usually abundant and prices fall," said Khudori in her statement on Monday, March 27.

She believes this policy is a dilemmatic one to be taken by the government as farmers are currently enjoying high prices for rice grains that usually drop during harvest season, but on the other hand, these steep prices of rice grain make it difficult for the State Logistics Agency (Bulog) to absorb local supplies.

Up to March 24, the agency had only managed to take in 48,513 tons of rice grains, which Khudori deems "A tiny number."

This year, the Bapanas (National Food Agency) requested Bulog to absorb 2.4 million tons of rice from domestic farmers – of which 1.2 million will become year-end supplies. 70 percent of the initial target is expected to be absorbed during the main harvest until May, however, the situation challenged the agency to meet the goal.

Last week, only 280,000 tons of CBP entered Bulog's warehouses, which is considered a tiny amount. Meanwhile, from March to May, Bulog will have to distribute rice social assistance (Bansos) to 21.35 million low-income families with each family getting 10 kilograms of rice. This means that 630,000 tons of rice are needed.

Relying on domestic rice absorption or procurement will not help the agency meet this target. Even though Bapanas had raised the government's purchase price (HPP) for harvested dry unhusked rice (GHKP) to Rp 5,000 per kilogram and Rp 9,500 for rice at Bulog warehouses, the prices for unhusked rice and rice in the market remain higher than the HPP.

"Bulog could absorb it through a commercial mechanism and make it possible for the CBP numbers to improve," said Khudori. But this step means that it will encourage Bulog to aggressively enter the market and compete with other business actors, both rice millers and rice traders. "The impact can raise the prices of rice," she said.

The most effective solution to prevent rice imports is to increase domestic production, however, the problem is that domestic rice production has declined in recent years.

Referring to data from Statistics Indonesia (BPS), Indonesia in 2018 had a surplus of rice but the volume of the surplus continued to decline – from 4.7 million tons in 2018 to only 1.34 million tons in 2022.

"When the amount of surplus shrinks, the reserve management and distribution becomes a crucial issue. When one miscalculates, the impact can be fatal," said Khudori.

The Indonesian government has decided to re-import rice this year. Based on a copy of the assignment letter received by Tempo, the National Food Agency head Arief Prasetyo Adi ordered Perum Bulog to import 2 million tons of rice by December 2023.

Source: https://en.tempo.co/read/1707562/dissecting-the-dilemma-behind-govts-rice-import-polic