The government has intervened in the prices of food and added to its stocks in order to stabilize them. Our hope is that everyone can feel the benefit of this policy.
The commodities that are the target of the government’s intervention this time are sugar, cooking oil and frozen meat. The price ceiling for all brands of sugar is Rp 12,500 per kilogram, for bottled cooking oil it\'s Rp 11,000 per liter and for frozen meat from India it\'s Rp 80,000 per kilogram.
To ensure that the decision of the Trade Ministry can be implemented, the government has made an agreement with the Association of Indonesian Retailers (Aprindo) and its distributors. This regulation will start to come into effect on April 7 in all modern retail stores.
We understand the government’s wish to protect the prices of a number of types of food. At the end of May we will enter the fasting month, a time when the demand for food usually increases, which is followed by a hike in prices. Food is still a source of inflation. It is hoped that by controlling the prices of food, the government would be able to control inflation and maintain the purchasing power of poor and low-income people.
However, experience suggests that controlling the prices of food will not be easy. Last year, this newspaper reported that the prices of a number of food commodities moved wildly during the fasting month. In September 2016, the Trade Ministry set a reference price at the farmer and consumer levels for seven food commodities – rice, sugar, beef, red onion, chili, soy and corn – as a benchmark for the government to carry out market intervention. In the field, the reference price did not immediately bring down prices even though the government had intervened by adding to the supply.
The price of goods is formed by its supply and demand. An increase in supply would quickly bring down prices. However, the market is not always perfect. This could be because certain players hold onto their stocks. The long supply chain is also believed to be a cause of the high prices at the consumer level and low prices at the farmer level.
The government’s decision to control the retail price ceiling, although done with good intentions, can cause unwanted consequences.
Farmers, for example, fear that the selling price of their sugar cane will be low, especially what they send to state-owned factories that are old and inefficient in producing sugar. There is also a concern among traders in traditional markets that consumers will turn to modern outlets and retail stores. Some also feel that the policy is biased in favor of urban areas and Java.
Therefore, the retail price control policy must come with an increase in upstream agriculture and livestock production and finish the task of shortening the supply chain.
