DMO Quota Raised to Ensure Raw Material Availability

KOMPAS/RONY ARIYANTO NUGROHO

People queue to buy cooking oil during a cooking oil and vegetable operation at the Katulampa Sub-District Office, East Bogor, Bogor City, West Java, Wednesday (9/3/2022).

JAKARTA, KOMPAS — The Trade Ministry has increased exporters’ crude palm oil (CPO) and olein supply quota for the domestic market, or the domestic market obligation (DMO), from 20 percent to 30 percent. The step was taken to secure the supply of raw materials and ensure the availability of cooking oil in the country.

Trade Minister Muhammad Lutfi said on Wednesday the policy would take effect as of Thursday (10/3/2022), until global CPO prices returned to normal or attained a new equilibrium. The ministry was coordinating with the National Police to crack down on cooking oil speculators and hoarders as well as CPO smugglers.

The DMO benchmark price was maintained at Rp 9,300 per kilogram for CPO and Rp 10,300 per kg for olein. At the same time, the ministry has maintained the policy on the retail price ceiling (HET) for cooking oil at Rp 11,500 per liter for bulk cooking oil, Rp 13,500 per liter for packaged low-grade cooking oil, and Rp 14,000 per liter for packaged premium cooking oil.

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"Exporters of CPO, olein, and used cooking oil must comply with the provision. Likewise, this is binding for cooking oil distributors and traders. If they do not comply, export [licenses] will not be issued or [their] business permit will be revoked," Lutfi told a virtual media conference in Jakarta.

In addition to securing raw materials and the availability of domestic supplies, the policy has been adopted because world CPO prices remain volatile and high while the domestic cooking oil industry requires raw materials at affordable prices.

Trade Ministry data show that at the PT Kharisma Pemasaran Bersama Nusantara auction market, the price of CPO intended for exports via Dumai Port, Riau Islands, reached Rp 18,250 per kg on 1 March 2022. The CPO export price was still hovering at Rp 17,651 per kg on 8 March.

HUMAS POLDA KALSEL

An officer shows packaged cooking oil confiscated from the warehouse of the hoarders during a press conference in Banjarmasin, South Kalimantan, Tuesday (8/3/2022). In the midst of the scarcity and high price of cooking oil in the market, the South Kalimantan Regional Police arrested a business actor suspected of hoarding packaged cooking oil and confiscated 31,320 liters of cooking oil..

The average national prices for bulk cooking oil and packaged low-grade cooking oil as of 8 March were Rp 16,100 per liter and Rp 16,500 per liter, respectively. The prices were up compared to 1 March, when the commodity was priced at Rp 15,800 per liter for bulk cooking oil and Rp 16,400 per liter for packaged low-grade cooking oil.

According to Lutfi, the country had ample supply of cooking oil for domestic consumption, thanks to compliance with the DMO for CPO and olein. Between 14 Feb. and 8 March, the ministry issued 126 export licenses to 54 exporters. The volume of CPO and olein contributed through the DMO reached 573,890 tons, or 20.7 percent of the total export volume.

Hampered distribution

The DMO policy for CPO and olein recorded a distribution of 415,787 tons of bulk and packaged cooking oil over the last 23 days to traditional markets and high-end retailers.

The amount exceeds the estimated 327,321 tons of cooking oil for monthly consumption. However, cooking oil is still scarce in the market because of a distribution snag.

Disrupted distribution has been blamed for hoarding of cooking oil and illegal exports or smuggling of CPO/olein. In addition, large quantities of cooking oil using raw materials from the DMO has been leaked or sold to medium and large companies. The civil servants assigned to investigate the matter have submitted their findings and reports to the Food Task Force.

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Ratna Nurkhoiri, a social technology researcher in at the Palm Oil Research Center, said that with national CPO production in 2022 estimated to reach 51.01 million tons, the 20 percent DMO policy means around 10.2 million tons of the commodity would cater to the domestic market. "This should be more than enough," she said.

As of Wednesday, some areas were still experiencing a shortage of cooking oil at prices above the government’s price ceiling, such as in Makassar, South Sulawesi, despite several market operations.

In Palembang, South Sumatra, the local administration has imposed strict market operations, with buyers required to present an identity card and inking their finger after completing a transaction. (HEN/RAM/REN/JUM)

This article was translated by Musthofid.