Mopping up the Cooking Oil Mess

KOMPAS/RADITYA HELABUMI

Residents buy packaged cooking oil which is sold for Rp. 14,000 per liter at Rusunawa KS Tubun, West Jakarta, Wednesday (19/1/2022).

The government has announced a new regulation on cooking oil. They have revoked the oil subsidy while stipulating the obligation for exporters to supply domestic needs.

The termination of price subsidies for cooking oil took effect on 1 June 2022. On 23 May 2022, exports of crude palm oil (CPO) and its derivatives were reopened after being banned. Along with the abolition of subsidies, palm oil companies participating in the cooking oil subsidy program have two options for export regulations.

The first choice, the companies which export CPO and its derivative products as much as three times the quota are required to supply the domestic market, known as the domestic market obligation (DMO). Second, companies that choose to collect palm oil subsidies from the Palm Oil Support Fund Agency (BPDPKS) can export starting 1 June 2022, following the policies set by the government.

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The new rules add to at least nine regulations regarding CPO and its derivative products created since November 2021 in an effort to control the increase in cooking oil prices. The price of bulk cooking oil once touched Rp 20,000 (US$1.37) per liter, while packaged cooking oil rose to Rp 25,000 per liter.

But in its implementation, the policy did not succeed in reducing the increase in cooking oil prices.

The regulation requiring companies to meet the DMO and with a domestic price obligation (DPO) was enforced in early 2022. The goal was to provide cooking oil raw materials in sufficient quantities for domestic needs. But in its implementation, the policy did not succeed in reducing the increase in cooking oil prices.

The policies, which change in the short term, have so far not been able to clean up the mess of cooking oil prices. The problem is at the global level, namely the high prices of CPO, as well as domestically with the need for biodiesel, cooking oil, other industries — and the desire of entrepreneurs to make big profits.

The Trade Ministry's efforts to sell cooking oil without subsidies directly in 10,000 locations at Rp 14,000 per liter need to take into account the challenges in the field. In practice, price fixing occurs in the wet market by market participants. In addition, a number of cooking oil factories already have efficient distribution networks.

In the upstream, oil palm farmers should not be harmed. As of 31 May 2022, the price of fresh fruit bunches from oil palm farmers is around Rp 2,037-Rp 2,347 per kilogram, below the average price from the provincial plantation office of Rp 2,906.

KRISTI DWI UTAMI

The driver of a tanker truck filled with cooking oil checks his vehicle which is parked in front of an oil storage warehouse in Dampyak Village, Kramat District, Tegal Regency, Central Java, Wednesday (1/12/2021).

In cleaning up the mess of the cooking oil prices we must place it in the context of maintaining food security in the face of the threat of rising world food prices, and people's access to quality food. Palm oil

for cooking is a source of fat, of energy, which must be affordable and available for the people, especially vulnerable groups, because Indonesia is the world's largest producer of palm oil.

The changing regulations should be accompanied by transparency and accountability considering that there are already high-ranking officials at the Trade Ministry and the private sector being charged with corruption in cases linked to the CPO export quota and its derivatives.

This article was translated by Hyginus Hardoyo.