Fadli Zon Values Government Failed To Handle Cooking Oil Scarcity, This Is The Reason

Jakarta - Member of the House of Representatives of the Republic of Indonesia, the Gerindra faction, Fadli Zon, has calculated that it has been almost four months that people have experienced a shortage of cooking oil. According to him, as the largest CPO producer in the world, this is an irony.

Fadli assessed that the protracted problem proves not only how bad and slow the government's handling is, but also a reflection of insensitivity to the difficulties of the people who have been suffocated in the midst of the pandemic crisis.

Fadli also believes that the government certainly has a myriad of reasons. Starting from the rising price of CPO in the global market to the increasing demand for CPO. However, he continued, all of these are cliché problems that can actually be predicted. Due to the absence of appropriate anticipatory steps, the situation is getting more and more chaotic. Meanwhile, it is the people who have to bear the scarcity and high price of cooking oil.

Based on the Ombudsman's notes, the cooking oil crisis in Indonesia is reflected in three phenomena, namely the hoarding of cooking oil stocks, the transfer of goods from modern markets to traditional markets, and the emergence of panic buying in the community.

A number of efforts have been made by the government. Starting from subsidizing cooking oil prices, to limiting export faucets through Domestic Market Obligations (DMO) and the application of Domestic Price Obligations (DPO). However, ironically, this policy has made the stock of cooking oil on the market even more limited, even scarce.

“The price subsidy policy that was implemented in reality failed because it was not well targeted. 61% of household cooking oil consumption is bulk oil, but the policy implemented is instead subsidizing packaged oil. This means that the policies taken are inconsistent," he said in a press release received by VOI.id, Wednesday, February 23.

Fadli assessed that the government had failed in overcoming the problem of scarcity of cooking oil. According to him, there are two reasons why the government failed.

“First, the handling carried out by the government departs from the wrong diagnosis of the problem. Through the DMO policy, for example, the government is suppressing the volume of CPO exports. It is hoped that domestic CPO supply will increase. However, what happened was that the allocation was not optimally absorbed for cooking oil production, but instead for biodiesel raw material, the selling price of which received a subsidy of US$85/ton from the Palm Oil Plantation Fund Management Agency (BPDPKS)," he said.

Meanwhile, he continued, for raw material for cooking oil, CPO producers must sell it at domestic prices, because there is no subsidy from BPDPKS.

"This is where the problem is. Although the availability of domestic CPO stocks has increased, the domestic regulations are not friendly to CPO which is used as raw material for cooking oil. As a result, cooking oil remains scarce in the market,” he said.

Fadli, who is the representative of the people of the West Java V electoral district, explained that in terms of exports, there was actually no increase in volume even though the price of CPO in the international market was high, but the increase in exports for 2020-2021 was not significant, only 0.2 million tons.

"So, we actually need to be aware of this DPO policy. Implementing DPO policies that are uncontrolled and unaccompanied by domestic governance can be a backfire for oil palm farmers. Because with this policy, palm oil mills will reduce the purchase price of fresh fruit bunches (FFB) to farmers. When the price of CPO soars, oil palm farmers cannot feel the increase in profits, especially when the price is limited. Oil palm farmers are definitely getting pressured,” he explained.

The second note, he continued, is that the fundamental problem of the current scarcity is the existence of cartel practices in palm oil governance in Indonesia. According to him, after a number of efforts have been made and it turns out that they have not been effective, the government does not need to be allergic to linking the current shortage of cooking oil with cartel practices that are clearly visible in palm oil governance in Indonesia.

"Based on KPPU's records, there is a market concentration of 46.5% in the cooking oil market. This means that almost half of the market is controlled by four cooking oil producers. This is what makes the market structure of oil palm plantations tend to be oligopolistic, dominated by a group of business actors," he concluded.

According to a note issued by the KPK regarding the palm oil commodity management system, it was also stated that nearly Rp 2 trillion, or more than 50 percent of the biodiesel subsidy allocated from BPDPKS funds, was enjoyed by one business group.

With a model like this, there are indications of cartel practices in the form of an industry that is able to control prices in the market, which is getting bigger. Not surprisingly, they also have a strong bargaining power against the government.

The practice of cartels also has a negative impact on the fate of farmers. The dominance of one industry group, of course, makes them have the ability to set and control prices at the farm level, which will find it difficult to get the best selling price for their garden products.

Thus, the current scarcity of cooking oil is actually an accumulation of the messy management of palm oil in Indonesia. As long as the market structure of oil palm plantations is allowed to be oligopolistic, do not be surprised if the policies issued by the government will not be effective in overcoming the scarcity of cooking oil.

The government must unravel the dominance of these business actors, so that there is no longer a concentration of the palm oil market in only a few groups. This is an important step that must be taken by the Government to stabilize the price of cooking oil which is sustainable in the country.