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Retailers wary about government's cheap food program

Jakarta Post - February 14, 2024

Aditya Hadi, Jakarta – Retailers have expressed their unwillingness to comply with future government-led cheap food programs, citing unfinished business from a previous, similar program for cooking oil.

The programs work by requiring retailers to sell a particular much in-demand staple food commodity at a price determined by the government that is far lower than the market price.

"Sorry to say, but if the government requests us to implement a cheap food policy for other commodities, such as rice, we will not adhere to that until they pay us [compensation]," said Roy Mandey, chairman of the Association of Indonesian Retailers (Aprindo), on Monday.

In January 2022, the government issued a regulation requiring firms to sell cooking oil at a ceiling price of Rp 14,000 (90 US cents) per liter, despite the market price hovering between Rp 17,000 and Rp 24,000, as a result of the soaring international palm oil price.

To cover the price gap, the government promised to compensate businesses using funds from the Palm Oil Support Fund Agency (BPDPKS), which collected the money from palm oil exporters.

However, more than two years later, amid a change in Trade Ministry leadership and a graft case, none of the businesses have received the promised payments to cover their shortfall.

Last year, a group of retailers and cooking oil producers opted to seek recompense in court. The Business Competition Supervisory Commission (KPPU) estimated last year that the government owes some Rp 1.1 trillion as a result of the price-control program.

Roy from Aprindo said that the association had the details and proof to support the claim.

"The government said a calculation from auditing firm Sucofindo resulted in a different figure, but they've never revealed their calculations. We feel hard done by," he stated.

Retailers raised the problem again when asked by reporters if the government wanted to implement a similar policy for rice after the country faced surging prices exceeding the government's price ceiling.

This has resulted in a shortage of rice among many retailers, as firms have avoided stocking up because the price cap would see them incur losses.

To solve the problem, retailers have suggested revising the price ceiling to reflect the current price surge.

The National Food Agency (Bapanas) asked retailers on Tuesday to reduce their margins so they could meet the price cap and in return the government would ask the State Logistics Agency (Bulog) to supply them with cheaper rice at a cost borne by the government.

Bapanas also maintained that it could not accommodate requests from retailers to adjust the price ceiling.

Aprindo's Roy responded that the government's demand might be acceptable as long as the government did not force retailers to sell at a loss.

"Basic commodities like rice function as a traffic puller for retailers, as customers also buy other products. Thus, we still need to provide that [despite reduced profits]," he concluded.

Source: https://asianews.network/retailers-wary-about-governments-cheap-food-program