Government, Business Set Price Ceiling for Staple Foods

Ministry of Trade introduces maximum prices for sugar, oil and frozen meat during Ramadan

By Gilang Ardana
Tuesday, May 16, 2017

The Ministry of Trade has reached agreement with related business associations to set price ceilings for three main food commodities during Idul Fitri and Idul Adha. The agreement, which will be effective from April to September, will impose price ceilings for sugar, cooking oil and frozen meat in modern retail outlets, including minimarts, supermarkets and wholesalers.

The agreement sets the maximum price for sugar at Rp 2,500 per kilogram, Rp 11,000 per liter for simple-packaged cooking oil and Rp 80,000 per kilogram for frozen meat. It was signed in early April based on output from a meeting between the ministry and 20 sugar distributors, two cooking oil industry associations, one meat distributor association and the Indonesian Retailer Merchants Association (APRINDO).

Trade Minister Enggartiasto Lukita said that the agreement would not hurt businesses as they will still gain proper profits even though the price ceiling is set.

“I was once a businessman as well, and I know that when they say they [businesses] suffer from losses, what actually happens is that they earn lower profits,” said Enggartiasto after the signing, also noting that he believed this will in fact encourage distributors to create a more efficient supply chain.

To ensure compliance with the agreement, the ministry will collaborate with the Commission for the Supervision of Business Competition (KPPU) to monitor the price of the three commodities in modern retail outlets.

KPPU head Syarkawi Rauf said that the organization will be actively conducting in-field monitoring of modern retail outlets.

“If there are still [modern retailers with] selling prices above the HET [the ceiling price], we may consider they are creating a cartel price and we will ask for clarification,” he said. “The sanction can be a revocation of their business license.”

The collaboration between the ministry and KPPU will also include an evaluation of the program to decide on its continuation if it is successful.

When asked if this can be viewed as government intervention, KPPU Director Gopprera Pangabean said that this practice is an exception because the government does have a right to impose price ceilings.

It is guaranteed under Presidential Regulation No. 71 of 2015,” he said.

Supported by business

Various business associations involved in the discussions with the ministry conveyed a positive response to the agreement, most saying that they have already tried their best to offer affordable prices to customers.

APRINDO head Roy Mandey said that the organization supports the program because it can create economic justice.

“We have calculated it,” he said. “We will still gain proper profit even though it will decrease a bit.”

He added that the agreement would only pose a limited risk to modern retailers selling premium products not regulated by the agreement.

Echoing the statement from APRINDO, was the Indonesia Vegetable Oil Association (GIMNI).

“I’ve told the trade minister that this is the right path,” said GIMNI executive director Sahat M. Sinaga, who added that he had also asked the ministry to start supervising the country’s oil distribution chain as producers had already sold products at low prices.


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