Government Raises Reference Price of Rice

President Jokowi promised that the government would try to even out the prices so that the farm-level price for unhulled rice was good and fair enough. The price of rice at the level of traders should be reasonable too.

KOMPAS/TOTOK WIJAYANTO (TOK)

Laborers from Ngawi harvest rice in Pelem Gadung Village, Karangmalang, Sragen, Central Java, during the first big harvest season, Wednesday (1/3/2023).

JAKARTA, KOMPAS — After three years, the government has finally revised its policy on its reference price (HPP) for unhulled rice and rice. Apart from the HPP, the government has also set the retail price ceiling (HET) for rice. With the policy revision, it is hoped that the farm-level price of unhulled rice and the prices for traders and consumers are now fair.

Arief Prasetyo Adi, the head of the National Food Agency (BPN), announced the increase in the HPP for both unhulled rice and rice after attending a limited meeting presided by President Joko “Jokowi” Widodo at the State Palace in Jakarta on Wednesday (15/3/2023).

Arief said the farm-level price of fresh unhulled rice (GKP) was set at Rp 5,000 (30 US cents) per kilogram, while the mill-level price of GKP at Rp 5,100 per kg and the mill-level price of dry mill-ready dried unhulled rice (GKG) at Rp 6,200 per kg, while the GKG price at warehouses managed by the State Logistics Agency (Bulog) was set at Rp 6,300 per kg and the price for rice at Bulog warehouses was Rp 9,950 per kg.

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In line with the previous regulation, namely Trade Minister Regulation No. 24/2020 on determining the government’s reference prices for unhulled rice and rice, farm-level price of GKP was set at Rp 4,200 per kg and the mill-level price at Rp 4,250 kg. GKG prices were set at 5,250 per kg for mills andRp 5,300 per kilogram for Bulog warehouses, while the price of rice at Bulog warehouses was set at Rp 8,300 per kg.

In addition to the changes in the reference prices for unhulled rice and rice, the government also set the maximum retail price ceiling (HET) for rice by zone at the meeting.

The HET for medium-quality rice in zone 1, which covers Java, Lampung, South Sumatra, Bali, West Nusa Tenggara and Sulawesi, was set at Rp 10,900 per kg.

It is hoped that the farm-level price of unhulled rice and the prices for traders and consumers are now fair.

While the HET for medium-quality rice in zone 2, covering Sumatra, Lampung and South Sumatra, as well as East Nusa Tenggara and Kalimantan, was set at Rp 11,500 per kg. The HET for medium-quality rice in the zone covering Maluku and Papua was set at Rp 1,800 per kg.

Arief added that the President had also asked to immediately announce the new prices. Legislators were currently finalizing the legal umbrella for the increased reference prices, so the provisions regarding the HPP and the HET would take immediate force.

KOMPAS/TOTOK WIJAYANTO (TOK)

A worker from Ngawi is lifting rice in Pelem Gadung Village, Karangmalang, Sragen, Central Java, during the first big harvest season, Wednesday (1/3/2023).

He said the process of formulating the new HPP and HET also involved farmers, traders and the public.

“Therefore, the roles of all three [groups] must be maintained. The figures could be decided quickly, so we have to appreciate all associations, both in the upstream, such as the KTNA [Farmers and Fishers Association], HKTI [Indonesian Farmers Association], the Indonesian Farmers Union [SPI], then in the middle there is a rice millers’ association, Perpadi, and others, so that we could decide the price at all levels the we all think is reasonable," he said.

The figures could be decided quickly, so we have to appreciate all associations.

Previously, a number of farmers’ associations and organizations submitted their proposed HPP at a meeting with the BPN in Bogor, West Java, on Thursday (2/3). The Association of Seed Banks and Indonesian Farming Technology (AB2TI), for example, proposed an HPP for GKP of Rp 5,700 per kg, the HKTI proposed Rp 5,550 per kg, the SPI Rp 5,600 per kg, the KTNA Rp 5,400 per kg, and the Indonesian Farmers Alliance (API) proposed an HPP of 5,800 per kg.

In addition, the Rural Development Activists Community proposed a GKP price of Rp 5,375 per kg, while the Agriculture Ministry proposed a GKP price that ranged between Rp 4,800 and Rp 5,100 per kg. Meanwhile, the National Research and Innovation Agency (BRIN) proposed a GKP that fell within the price range of Rp 4,850 to Rp 5,000 per kg.

Government indicators

Regarding the decision, Bulog corporate secretary Awaludin Iqbal said that revising the HPP was very important to support its rice procurement program. "In carrying out our task of securing fair prices at the farmers’ level, we need a price instrument as a legal basis," he said when contacted on Wednesday.

Awaludin added that the volume of unhulled rice and rice Bulog purchased could be used as an indicator of market prices. If Bulog procured a large volume, it would indicate that the market price of unhulled rice was lower than the HPP. Conversely, if the volume purchased by Bulog was small, it would indicate that the market price was higher than the HPP.

This year, the BPN has set Bulog’s procurement target at 2.4 million tonnes of rice from the domestic market. As much as 70 percent of this total volume is expected to be purchased during the main harvest in March-April 2023.

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However, until the end of February 2023, the domestic procurement of rice for the government's rice reserves (CBP) had reached a total of only 15,451 tonnes.

Regarding this policy, AB2TI chairman Dwi Andreas Santosa said the figures had gone through various considerations, including its impact on consumers, before they were finalized. "Our proposal for GKP price was still the same as that proposed by other farmers’ networks in Indonesia, which is in the range of Rp 5,400 to Rp 5,800 [per kg] for farmers," he said.

Regarding the HET for rice, he expressed his hope that government would only use the figure in price interventions, such as when the price of rice at the consumer level exceeded the HET level. Farmers hoped that the provisions regarding the HET for rice would not depress the price of unhulled rice at the farm level.

When domestic production is enough, why import?

As for the option to import rice, Arief said the government was prioritizing domestic production. “When domestic production is enough, why import? So, when we do need [to import], we will do it, but only as a last option," he said.

Earlier on Wednesday morning, President Jokowi promised that the government would try to even out the prices so that the farm-level price for unhulled rice was good and fair enough for farmers. The price of rice at the level of traders should be reasonable too, as should be the price of rice at the consumer level. When prices rise, the usual response is to dump as much rice as possible into the market. (CAS/INA/JUD/MKN)

This article was translated by Hendarsyah Tarmizi.