Indonesia to scrap subsidy for bulk cooking oil

Bulk cooking oil held a lion's share of 62 per cent of total domestic cooking oil demand, with small businesses and lower-income families its main consumers.

Vincent Fabian Thomas

Vincent Fabian Thomas

The Jakarta Post


June 2, 2022

JAKARTA – The Industry Ministry has announced it would scrap the subsidy for bulk cooking oil, effective from Tuesday, leaving many producers unable to file a subsidy claim for selling the staple food below market prices. Introduced in January, the subsidy scheme compensated producers for selling cooking oil at Rp 14,000 (96 US cents) per liter at a time when market prices were at Rp 20,000 per liter due to high global crude palm oil (CPO) prices. The difference was covered using funds from the Palm Oil Support Fund Agency (BPDPKS).

“[Subsidizing] the bulk cooking oil price using the BPDPKS fund will end on May 31 midnight,” the Ministry’s Agroindustry Director General Putu Juli Ardika told reporters at a press briefing on Monday. Replacing the subsidy scheme, the so-called bulk cooking oil public program (MGCR) is to take effect on June 1. The MGCR sets price caps and domestic market quotas for cooking oil ingredients such that prices fall to the government target price. Bulk cooking oil held a lion’s share of 62 percent of total domestic cooking oil demand, with small businesses and lower-income families its main consumers.

Putu said the Trade Ministry would compensate producers by offering to convert the payable subsidies into cooking oil export quotas. As of Monday, 35 out of 61 companies were willing to take the offer, Putu said, adding that the ministry was expecting the rest to respond soon. Of the 61 companies, only five of them have made a claim and received the payable subsidy as of Monday, ministry data show. Putu said the other companies failed to submit the necessary documents.

Through the MGCR program, the government expects to increase domestic bulk cooking oil supplies up to 12,000 tons a day, from 9,000 tons previously, Putu said. The numbers were calculated based on Statistics Indonesia (BPS) and Trade Ministry data. Ahead of the new policy, the average price of bulk cooking oil has remained at Rp 16,620 per kilogram, far above the Rp 15,500 per kg ceiling price, according to Trade Ministry data. Putu said that despite the gap, the ministry was confident that prices would soon hit the price target as the government had secured more than 442,672 tons of bulk cooking oil from March up to Monday.

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