Government Bans Exports of Cooking Oil Raw Materials

KOMPAS/RENY SRI AYU

A worker at the PT Hardaya Inti Plantations oil palm plantation in remote Central Sulawesi is collecting palm fruit bunches to be transported to a CPO processing plant.

JAKARTA, KOMPAS — The government has banned the export of cooking oil and cooking oil raw materials starting Thursday, April 28. President Joko “Jokowi” Widodo says the government will closely monitor and evaluate the implementation of the export ban, which will last for an unspecified time to ensure the availability of cooking oil at affordable prices.

The President announced the ban on the export of cooking oil and its raw materials at the State Palace in Jakarta on Friday (22/4/2022), after leading a meeting on the people's basic needs.

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"I will continue to monitor and evaluate the implementation of this policy so that the availability of cooking oil in the country is abundant at affordable prices," said President Jokowi.

When asked for his views on the export ban, the director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, said it was not the right decision. If it was only intended to ensure sufficient supply in the domestic market, the export ban would not be needed, he said.

“The policy could repeat the mistake when [years ago] coal exports were immediately stopped. Was the problem solved? No, it was instead protested by potential buyers abroad. Such an approach must be stopped," he said.

According to Bhima, the policy that should have been carried out was simply to reimpose the domestic market obligation (DMO) policy, which requires crude palm oil (CPO) producers to sell at least 20 percent of their exports in the domestic market.

Allocating 20 percent of total CPO exports for cooking oil needs is more than sufficient.

“In the past, when the DMO was still in place, the problem was about the producers’ non-compliance, which often resulted in a gratification scandal. Allocating 20 percent of total CPO exports for cooking oil needs is more than sufficient," he said.

Price disparity problem

So far, the high price disparity between packaged and bulk cooking oil in the market has created a loophole for fraud from upstream to downstream. Since the subsidized cooking oil program was launched in the past month, there have been a number of indications of violations in the form of repackaging of bulk cooking oil and monopoly in distribution which has caused the price to exceed the price ceiling of Rp 14,000 (97 US cents) per liter.

KOMPAS/WAWAN H PRABOWO (WAK)

Residents choose packaged cooking oil at a shopping center in the Pondok Aren area, South Tangerang, Banten, Wednesday (11/24/2021).

As a result, until now, the price of bulk cooking oil, which should be affordable by the community and micro and small businesses, remains above the price ceiling of between Rp 14,000 and Rp 15.500 per litter. As of Friday, the average bulk cooking oil price is still Rp 17,700 per liter. In some provinces, the price even exceeds Rp 20,000 per liter.

In Cipete, South Jakarta, a distributor repackaged bulk cooking oil and sold it at Rp 17,000 per litter, far higher than the ceiling price.

The Industry Ministry said that it had found several indications of irregularities in the distributor level when it conducted a field inspection on the sales of the subsidized bulk cooking oil during the past two weeks. In Cipete, South Jakarta, a distributor repackaged bulk cooking oil and sold it at Rp 17,000 per litter, far higher than the ceiling price.

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There is also a distribution monopoly in which the first, second and retail distributors are owned by the same person or company.

"As the entire distribution chain is often controlled by one person, the price can easily exceed the price ceiling,” said a spokesman for the Industry Ministry, Febri Hendri, on the sidelines of a field inspection in Batu Ceper, Tangerang, Banten, Friday.

Apart from Cipete, there were also indications of similar violations in Banten, West Java and Central Java, he said.

Instead, the task of distributing bulk cooking oil can be transferred to state-owned food companies such as ID Food and Perum Bulog, which have a wide distribution reach to remote areas.

The Industry Ministry’s director general for agriculture, Putu Juli Ardika, said that no company had been blacklisted because his office was still waiting for the results of the investigation. If a company was found to have violated the law, its license to sell subsidized cooking oil would be evaluated. For, example, the company would no longer be allowed to participate in the subsidized cooking oil program. Instead, the task of distributing bulk cooking oil can be transferred to state-owned food companies such as ID Food and Perum Bulog, which have a wide distribution reach to remote areas.

(This article was translated by Hendarsyah Tarmizi).