New Approach to Food Subsidy

Interest rate subsidies to build government food reserves show the seriousness of the government in handling food with a new approach.

KOMPAS/TOTOK WIJAYANTO

Buyers check the quality of each type of rice at the Cipinang Rice Main Market, Jakarta, on Monday (3/10/2022).

Finance Minister Regulation No. 153 of 2022 dated 2 November 2022 regulates the provision of loan interest subsidies for government food procurement (CPP). The organizers of the CPP are the State Logistics Agency (Bulog) and the National Food Agency (BPN). The loan must be from state-owned banks and the loan period is a maximum of six months. The subsidy is taken from the State Budget (APBN) (Kompas, 10/11/2022).

The government's decision to provide loan interest subsidies to form the CPP became a new approach after the 1998 economic crisis. Indonesia, which requested assistance from the International Monetary Fund to overcome the crisis, had to comply with IMF requirements. One of the requirements was to remove subsidies for food.

In the course of time, Bulog as a government-owned agency tasked with handling national rice reserves, including those regulated in Government Regulation No. 7 of 2003, had to fulfill commercial functions of a company. One of them was using commercial funds from banks to carry out its functions.

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This new regulation by the finance minister shows the seriousness of the government of President Joko “Jokowi” Widodo in maintaining national food production. To encourage production, there is a guarantee of good prices for farmers, breeders and fishermen. The government stipulates 11 types of staple food, namely rice, corn, soybeans, onions, chilies, poultry meat, eggs, ruminant meat, cooking oil, consumption sugar and fish.

We know that farmers, fishermen and breeders will continue to produce if they make sufficient profits. Some rice farmers continue to plant even though they lose because rice farming has become a way of life. However, the younger generation is increasingly disinterested in farming, especially food crops, because the income from farming is less than that of businesses in other fields.

We can read the existence of a loan interest rate subsidy as a direct order to Bulog and BPN to buy important food items from farmers at good prices. This is a new approach because since Indonesia's independence, the government has been more concerned with consumers, where the price of food, especially rice, is made as low as possible on the grounds of meeting the needs of the workers' and laborers' groups.

KOMPAS/P RADITYA MAHENDRA YASA

Farm workers planting paddy in Mojorejo village, Boyolali district, Central Java, on Wednesday (2/11/2022).

Following this new policy, the government's purchase price is set nationally, but the interest subsidy must open up the possibility for Bulog and BPN in the regions to buy at local prices. Prices can be higher than the national purchase price, but must not be lower. This price determination is shared with the governor and even with the regent, in accordance with the contents of Law No. 8 of 20112 on food.

In the end, food security must be in line with production capacity and market absorption. Farmers should have nothing to lose and consumers can access food. Only in that way will our food security be strong.

This article was translated by Hyginus Hardoyo