Why Indonesia’s palm oil export ban hasn’t cooled cooking oil prices By Reuters

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© Reuters. People buy cooking oil made from palm oil at a supermarket in Jakarta, Indonesia March 27, 2022. REUTERS/Willy Kurniawan/Files

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By Bernadette Christina and Fransiska Nangoy

(Reuters) – Indonesia, the world’s biggest exporter of palm oil, has halted shipments of edible oil since April 28 in a bid to flood the domestic market with supplies to control soaring palm oil prices. cooking oil.

Despite these harsh policies that have shaken edible oil markets and cost hundreds of millions of dollars in lost revenue, the price of cooking oil, a staple food for Indonesian families, has not come down, reaching President Joko Widodo’s approval rating.

HOW ARE THE INDONESIAN AUTHORITIES TRYING TO CONTROL COOKING OIL PRICES?

Since November, authorities have rolled out a bewildering array of policy measures, including subsidies, export permits and a palm oil tax as well as export bans. Yet that has failed to bring the cost of the palm oil-based household necessities used by most people in the world’s fourth most populous country in line with the government’s target.

WHAT HAPPENED TO COOKING OIL PRICES?

Indonesian authorities have pledged to lift the export ban once bulk cooking oil prices return to 14,000 rupiah ($0.9560) per liter nationwide. The price of cooking oil has fallen from its highs, but Commerce Ministry data showed on Friday that cooking oil averaged 17,300 rupees per litre, down from an average of 18,000 rupees in April but up from 13,300 rupees in July.

INDONESIAN MINISTER ACCIDENTED WITH ‘PALM OIL MAFIA’

On March 18, Commerce Minister Muhammad Lutfi accused a “palm oil mafia” of exploiting the situation. Sending a chill to one of Indonesia’s main export sectors, the attorney general has launched a corruption probe into palm oil export licensing, arresting a senior Commerce Ministry official and three palm oil executives.

WHAT HINDERS COOKING OIL DISTRIBUTION?

Government efforts to lower prices include asking the national food supply agency, Bulog, to distribute more cooking oil. But last week, Bulog said a regulatory framework was not yet in place, meaning a plan to distribute subsidized cooking oil priced at Rs 14,000 had yet to start.

Bulog said the regulations were needed to avoid any missteps in implementation and to ensure clarity on how costs would be covered.

BUREAUCRACY SEEN AS ANOTHER FACTOR COMPROMISING POLICIES

Gulat Manurung, chairman of the smallholder farmer group APKASINDO, blames complicated government bureaucracy for blocking palm oil subsidy efforts.

The government provides a subsidy to compensate producers for any discrepancy between production costs and selling prices.

But for palm refiners to be paid by the Indonesian palm oil fund agency BPDPKS, a very detailed list of distributors and retailers must be provided, subject to state audit and with any potentially liable errors. of a prison sentence.

“Factories have the cooking oil, but they don’t sell to consumers,” said Gulat, who believes the system should be streamlined.

HOW DO AUTHORITIES SAY THEY ARE TRYING TO IMPROVE DISTRIBUTION?

The Department of Commerce announced a program on Tuesday to ensure cheap cooking oil reaches low-income households in thousands of places. The statement said retailers could sell cooking oil in bulk at Rs 14,000 per liter to people who provide them with identity cards.

Asked about distribution issues, Industry Ministry official Merrijantij Punguan Pintaria said there were many components, but logistics and transport limitations were the main hurdles.

WHAT WILL THE END OF THE GAME BE?

Jokowi, as the president is popularly known, said the need for affordable food trumped income concerns and the export ban would only be lifted once national needs were met. Palm oil traders have speculated that the ban may be at least partially lifted soon, especially with the filling of storage tanks.

Politics will likely play a key role in the timing. A survey this week by pollster Indikator Politik Indonesia showed the president’s approval rating at its lowest level in six years, largely linked to the rising cost of cooking oil and inflationary effects. .


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Felix J. Dixon