Tuesday, September 26, 2023 | 12:52 WIB

REFORMULATION OF NATIONAL RICE POLICY Indonesia promotes self-sufficiency but continues to import


Jakarta, IO – Indonesia has not imported rice (medium grade) for three years (2019- 21). This is an achievement in itself, as the recognition from the International Rice Research Institute (IRRI) on August 14 showed. But now Indonesia has turned into an object of ridicule, due to the government’s decision to import 500,000 tons of rice at the end of 2022. It’s easy to see why this policy sparked controversy. Many parties now even doubt the claim that Indonesia has been self-sufficient in rice. There are also those who suspected the import decision may be a covert attempt to raise fresh funds for the upcoming elections. 

The matter of importing rice is not a decision of just one ministry/ agency. In fact, it was decided in two closed meetings, presided over by the Coordinating Economic Ministry. Since this is clearly a government decision, there should be a debate on the matter, between different ministries/agencies. The conflicting statements emerging from the Agriculture Ministry (Kementan), State Logistics Agency (Bulog) and the National Food Agency (NFA), which can naturally be interpreted by the public as an inner rift within the government, should never have taken place. The fact of the matter is that all three institutions rely on data from the same source: Statistics Indonesia (BPS). They also previously agreed that there would be rice production surplus in 2022. 

So, what went wrong? Why didn’t they realize that the annual rice surplus turns out indeed to be quite small. From year to year, surplus volume tends to decrease, from 4.37 million tons in 2018 (equivalent to 1.7 months of national consumption) to 2.38 million tons in 2019, 2.13 million tons in 2020, and just 1.31 million tons in 2021. In 2022, BPS projects a surplus of 1.7 million tons. The decline went hand in hand with steadily falling production, from 33.94 million tons in 2018, to 31.31 million tons in 2019, 31.5 million tons in 2020 and a remaining 31.36 in 2021. 

Since the rice surplus is only modest, the management of rice reserves becomes crucial. Why? Because the surplus only covers 6-7 months. For the remaining months of a year, production is insufficient to meet the monthly demand of around 2.5 million tons, in what is known as paceklik (a season of scarcity). Further, only 9 out of 38 provinces reported a surplus. If the government rice reserves (CBP) are mismanaged, the rice market can find itself in turmoil, as what recently happened. 

From decades of experience, it is known that a simultaneous rice planting season has led to a steady, almost rhythmic harvest period – the main one being in February-May (60- 65 percent of total production), the dry season between June-September (25-30 percent) and the “scarcity season” in October-January. During the main harvest, production is abundant, as the quality of unhusked/ milled rice declines; hence, the low price. During the dry season, the quality improves and the price thus rises, peaking during the scarcity season. The iron law of supply-demand prevails. 

CBP procurement by Bulog follows this seasonal pattern. The agency absorbs the farmers’ harvest massively during the main harvest season (historically, about 65-70 percent of its procurement). If this momentum is missed, it is almost certain that the rice procurement target will not be achieved. Between 2018-21, Bulog’s rice procurement in the first semester averaged around 800,000 tons. By contrast, in the first semester of 2022, it only procured 550,134 tons. If this is combined with the previous stock of 808,311 tons and expenses of market operation, dubbed the Supply Availability and Price Stabilization (KPSH) of 219,730 tons from January-June, the CBP stands at 1,138,715 tons. Still adequate. (FIGURE-1) ; (TABLE-1) 

The problem is this: the level of CBP that is considered “safe” in normal times has become critical, because it was drained to “put out the fire” due to government’s policy mismanagement. First, management of the Basic Food Program distribution was flawed. I don’t know what the problem was, but cash transfers worth Rp200,000 per family per month, distributed to 20 million household beneficiaries, was late in its disbursement. This was compounded by duplicate distributions in August – a costly mistake. As a result, the price of rice (and eggs) has skyrocketed. The beneficiaries of the Basic Food Program reportedly bought rice in bulk. If we assume that each family bought 25 kg of rice, sold at Rp10,000 per kg, this adds up to 500,000 tons – a huge figure, equivalent to 20 percent of monthly rice demand. 

Second, a fuel price hike by more than 30 percent on September 3. This policy is believed to have contributed to the rice price surge, due to steeper production and transportation costs. Third, the procurement policy for commercial rice. Initially, to increase procurement, on September 2 the NFA enacted price flexibility for Bulog, by increasing the price of rice stored at Bulog warehouses from Rp8,300 to Rp8,800 per kg. Since this failed to increase uptake, the regulation was repealed and replaced by a commercial policy. Under this new policy, Bulog can fill the CBP with premium rice – instead of the medium-quality rice that has become the norm thus far – according to market price. This means Bulog was pushed to aggressively enter the rice market and compete with other established players. In an unintended consequence, this has driven the price even higher. (TABLE-2) 


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