Govt Told to Anticipate Price Increases and Supply Problems

The government is expected to move quickly in stabilizing the supply and prices of basic foodstuffs. It should also ensure that the mechanism for protecting vulnerable groups runs as expected.

KOMPAS/BAHANA PATRIA GUPTA

Residents buy cooking oil at the Cheap Quality Food Bazaar at the East Java Office of Agriculture and Food Security, Monday (28/3/2022). Many residents use the bazaar to look for a number of cheap commodities in the midst of rising prices ahead of Ramadan.

JAKARTA, KOMPAS — The government is working extra head to stabilize the supply and prices of basic foodstuffs. Prices of basic commodities have begun to increase long before the Ramadan fasting month and Idul Fitri. It is feared that prices will continue to increase when the fasting month starts next week.

Although packaged cooking oils have been released into the market mechanism, the government has issued a new policy to subsidize bulk cooking oil if the market price exceeds the retail price ceiling (HET) of Rp 14,000 per liter.

As for other foodstuffs, such as soybeans, beef, and sugar, the government has allowed the importation of these commodities to ensure that the market has sufficient supply. Both private companies and state-owned enterprises, such as the State Logistics Agency (Bulog) and PT Berdikari, will be importing these food commodities.

The Trade Ministry’s domestic trade director general, Oke Nurwan, said the ministry had assigned Bulog to import 100,000 tons of frozen buffalo meat, and that around 33,000 tons of the total amount had been imported. PT Berdikari had been tasked with importing 20,000 tons of frozen beef.

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To meet the soybean demand of tofu and tempeh producers, Bulog had also been tasked with importing 200,000 tons of soybean per month for four consecutive months. The government had provided around Rp 900 billion to subsidize the imported soybeans.

"The funds will be used to cover the difference between the price of imported soybeans and the selling price in the domestic market, which is around Rp 1,000 per kilogram,” Oke said last week.

In addition, the government has also issued a permit for importing raw sugar. The 2022 quota for imported raw sugar has been increased from 3.78 million tons to 4.37 million tons.

Meanwhile, as a long-term strategy, the National Food Agency is to increase food resilience by encouraging both imports and domestic production. The policy is expected to increase Bulog's food reserves aside from rice, especially in commodities with volatile prices, such as soybeans, beef, chilies, and garlic.

KOMPAS/AGUS SUSANTO

Residents buy daily necessities at Kranji Baru Market, Bekasi City, West Java, Monday (28/3/2022). The increase in the price of basic needs adds to the burden on the community ahead of Ramadan and Eid this year.

The agency and state-owned food holding company ID Food have started to transport cattle from livestock centers in a number of regions around the country to Greater Jakarta. An additional 5,000 heads of live cattle are needed to meet the growth in demand over Ramadan and Idul Fitri.

The head of the National Food Agency, Arief Prasetyo Adi, said the live cattle would be procured in stages, starting with ID Food’s procurement of 40 cows from East Java at the weekend.

"Next, there will be another 300 cows from Boyolali, Central Java, and 600 cows from Sumbawa, West Nusa Tenggara," said Arief.

Inflationary pressures

In addition to the increase in the prices of food commodities, the prices for energy, fertilizers, and livestock feed have also risen. The price increase in the domestic market is inseparable from the global rise in the prices of food and energy commodities. Indonesia could also experience growth in inflation, which has recently increased across the world.

The government's decision to increase value added tax (VAT) from 10 percent to 11 percent as of April 1, 2022 is also feared to contribute to domestic inflation.

The rising prices of a number of food and energy commodities have contributed to inflation. Annual inflation was recorded at 2.06 percent in February. The monthly per capita expenditure on food and non-food goods increased to Rp 1.26 million in March from Rp 1.22 million in March 2020.

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In contrast, workers' wages in August 2021 fell 0.72 percent compared to wages in August 2020. The average provincial minimum wage (UMP) for 2022 was increased only slightly by 1.09 percent.

Household consumption growth has yet to return to the pre-pandemic level of around 5 percent. In 2021, household consumption grew 2.02 percent after contracting 2.63 percent the previous year. This indicates that consumer buying power remains low.

KOMPAS/RIZA FATHONI

Officers drop food aid packages for residents who are self-isolating at home because one or more family members are positive for Covid-19 at RW 10 Pondok Bambu Village, East Jakarta, Saturday (26/2/2022). A total of 31 family heads in the RW received the distribution of basic food packages after data from residents who were positive for Covid-19 were submitted to the local sub-district.

Economist Yusuf Rendy Manilet from the Center of Reform on Economics (CORE) Indonesia said the government needed to immediately distribute social assistance to the middle class, which was vulnerable to the impacts of rising food and energy prices.

"Prices will increase before and during Ramadan. At the same time, we cannot predict how high the inflation rate or prices will go. As a precaution, the government has prepared a relief program for groups in the community that could potentially be affected because there is a bigger goal, namely to maintain economic growth," said Yusuf.

Earlier, chairman Said Abdullah of the House of Representatives (DPR) Budget Committee called on the government to increase the state budget allocation for the social protection (Perlinsos) program in order to reduce the burden on the public ahead of Ramadan.

It is important to ensure that the [people] have a sufficient supply of food.

The Perlinsos program is considered an effective means of providing social protection, as it benefits many poor people.

"I urge the government to strengthen this social protection policy," Said stated as quoted in an article posted to the DPR website on Tuesday (15/3/2022). The allocation for the Perlinsos program needed to be increased so that the Family Hope Program (PKH), Non-Cash Food Assistance (BPNT) and Pre-Employment Card programs could be expanded.

Government spending on social assistance for 2022 is set at Rp 154.8 trillion. The social assistance is intended to provide subsidized electricity to 37.9 million people, 8 million metric tons of subsidized liquefied petroleum gas (LPG) in 3-kilogram canisters, direct cash aid (BLT) to 7.5 million recipient families in rural areas, PKH to 10 million recipient families, basic food assistance to 18.8 million recipient families, and the Indonesian Smart Card (KIP) aid program to 20.2 million recipients, as well as cover the JKN universal insurance premium payments for 96.8 million poor families.

"I support increasing the ceiling of the social security [fund] up to Rp 15 trillion-Rp 17 trillion," stated Said, a politician from the Indonesian Democratic Party of Struggle (PDI-P). Said also called on the Food Task Force to continue monitoring and carrying out market operations in order to prevent hoarding.

"It is important to ensure that the [people] have a sufficient supply of food, considering that we will soon be entering the Ramadan fasting month and Idul Fitri in May," he said. (HEN/DIT/FLO/VIO/ITA)

This article was translated by Hendarsyah Tarmizi.