ICC Recommends That the Government Issue A Regulation Regarding Price Difference of Economic Reference Price and Highest Retail Price for Cooking Oil.

Jakarta (10/05) – Indonesia Competition Commission (ICC) recommends that the Ministry of Trade issue a regulation with regard to the discharge of the obligation to make payment for price difference of economic reference price and highest retail price of cooking oil to the already verified business. There is an urgent need for issuing the regulation for the sake of avoiding more substantial losses suffered by the public and business climate. This was conveyed by the Commissioner of ICC, Chandra Setiawan and the Economic Director of ICC, Mulyawan Ranamanggala in a meeting with the media held virtually today, May 10, 2023. ICC made such statement in responding to the plans to boycott or limit the purchase of cooking oil by retailers as a result of the not yet paid claims for the compensation for price difference that has reached IDR344 billion.

The existence of policy disruption with regard to the price difference of the economic reference price and highest retail price can bring about an unconducive business climate for not giving equal business opportunities to business actors for your information. This is contradictory to one of the purposes of the making of Law No. 5 of 1999. To that end, it is important for ICC to participate in overcoming such problem. ICC sees Government policy on the price difference of the economic reference price (HAK) and highest retail price (HET), namely Regulation of the Minister of Trade No. 3 of 2022, on the basis of the assessment using the Checklist of Business Competition Policies (DPKPU), has yet to take the aspect of efficiency in its implementation into account.

Based on the information issued by the Government, the HEK of the January 2022 packaged cooking oil was IDR17,260, being below the January 2022 average price of IDR20,914. Meanwhile, based on Regulation of the Minister of Trade No. 3 of 2022, the HET of the packaged cooking oil is IDR14,000. The regulation provides for the Oil Palm Plantation Fund Management Agency (BPDPKS) to make payment for the subsidies calculated from the differences between HAK and HET determined as a result of the implementation of the one-price policy for packaged cooking oil, that is IDR14,000. With the non-implementation of the policy set forth in Regulation of the Minister of Trade No. 3 of 2022, it is estimated that there are claims for the price difference of the economic reference price (HAK) and highest retail price (HET) worth IDR1.1 trillion that is not paid. Those claims come from the cooking oil producers and distributors which reach approximately IDR700 billion and IDR344,355,425,760 for roughly 600 modern retail corporations throughout Indonesia. In such an event, business actors suffer from losses twice, namely deriving from the difference between the HAK and the market price and that of between the HAK and the HET.

At the moment, the Ministry of Trade and BPDPKS cannot make payment because the above regulation that serves as the basis for payments, has been rescinded and there is no transitional regulation providing for the payment process as mandated in the said regulation. The government is still asking for legal opinion from the Attorney General’s Office to issue such policy. ICC has summoned and listened to the statement made by the Ministry of Trade and the Indonesia Retail Merchants Association (APRINDO) yesterday, May 9, 2023 and both parties had jointly agreed to convey to the media that regarding the payment for the supply of the packaged cooking oil under the BPDPKS fund payment scheme, is still awaiting the legal opinion from the Attorney General’s Office.

In addition, ICC sees that the gap between the price of CPO and that of cooking oil in Indonesia has increasingly become bigger. The CPO/cooking oil price ratio data records that the average ratio in 2021 was 25%, while the figure in 2023 is 40%. Thus, it is estimated that potential losses suffered by consumers due to the increase in the price of cooking oil owing to such sentiment reaches IDR457 billion between these two years. The losses suffered by the public will continue increasing if the price of cooking oil increases as a result of the efforts of business actors to limit access or the sales of cooking oil to the public.

To that end, ICC suggests that the Government c.q. the Ministry of Trade issue a regulation the content of which is discharging its obligations to pay the already verified business actors in accordance with Regulation of the Minister of Trade No. 3 of 2022. This issue deserves to become the priority of the Government to avoid losses or wider impacts on the public. Above all, cooking oil is one of the commodities that is badly needed by the public, hence, any disruption to the supply will result in an increase in the price of cooking oil and eventually will significantly affect the inflation rate.