Jakarta, CNBC Indonesia – The government set the highest retail price (HET) for cooking oil effective as of February 1, 2022. Previously, in mid-January 2022, the government had imposed one price of cooking oil at IDR 14,000 per liter.
The move follows a spike in domestic cooking oil prices. Along with the strengthening of the price of its raw material, crude palm oil (CPO). President Joko Widodo also ordered the Minister of Trade Muhammad Lutfi to immediately defuse the turmoil in cooking oil prices. In addition to price intervention, the Minister of Trade then carried out inspections to various regions.
After the government intervened in prices, there was a shortage of goods in the market. In the midst of public panic buying without control.
“This scarcity is an ironic situation considering Indonesia’s position as the world’s largest producer of CPO. Short-term policy steps are needed to address the causes of scarcity. Also, strategic steps to mitigate the recurrence of similar crises in the future,” citing a brief analysis published by LPEM FEB UI in the February 2022 edition, quoted on Tuesday (1/3/2022).
The results of the analysis conclude that the trigger for the current shortage of cooking oil is a spike in CPO prices, even up to 29% during 2021. Following an increase in demand amid the economic recovery during the Covid-19 pandemic.
“Indonesian CPO producers prioritize exports and cooking oil producers must buy raw materials at higher prices,” the analysis results.
In addition, there has been an increase in supply chain operational costs triggered by rising sea logistics costs since the end of 2021. Due to the scarcity of ships when transportation needs increase.
“The need for CPO for the B30 program was also suspected of having an effect on the scarcity of cooking oil. Moreover, there are subsidies incentives from the Palm Oil Plantation Fund Management Agency (BPDPKS),” reads the analysis of LPEM FEB UI.
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Photo: Workers finish making crackers at a factory in the Jakarta area, Tuesday (16/11/2021). The price of burnt bulk cooking oil is Rp. 18 thousand per kilogram (kg). This has an impact on cracker producers. (CNBC Indonesia/Tri Susilo) Workers finish making crackers at a factory in the Jakarta area, Tuesday (16/11/2021). The price of burnt bulk cooking oil is Rp. 18 thousand per kilogram (kg). This has an impact on cracker producers. (CNBC Indonesia/Tri Susilo)- – |
However, this allegation was denied because the need for B30 and the petrochemical industry is only about one-fifth of the total national CPO production.
“Another triggering factor is the alleged competition between groups of distributors. The initial findings of the security forces are that existing distributors are not getting supplies and after this crisis is over, it is expected that many new distributors will emerge who previously did not have the core business of distributing cooking oil.”
For this reason, LPEM FEB UI recommends short-term steps to improve the Indonesian cooking oil trade system. Namely, the government can ask producers who have their own plantations to keep allocating a portion of CPO for cooking oil production. With raw materials obtained from their own plantations, these producers do not experience actual losses even though international CPO prices are high.
“The producer will only record potential losses, which the government can compensate without using public funds. For example, the producer gains access to an open export market from various international trade agreements, both Preferential and Free Trade Agreements.”
Also, perform distribution operations to ensure supply from manufacturers and distributors to retailers.
“So, supply remains guaranteed and retailers can still serve consumers and enjoy reasonable profits,” as reported by LPEM FEB UI.
(dce/dce)
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