“The Effectiveness of Current Policies on HPP of Paddy/Rice in Husk and Rice In the Coming ASEAN Open Market 2016”

“The Effectiveness of Current Policies on HPP of Paddy/Rice in Husk and Rice In the Coming ASEAN Open Market 2016”

Jakarta, November 2, 2015 – Indonesian Peasant Alliance (API) in cooperation with the Directorate of Staples and Strategic Goods of the Ministry of Commerce of the Republic of Indonesia (Bapokstra of Ministry of Commerce) has organized a Focus Group Discussion (FGD) entitled “The Effectiveness of the Current Policies on HPP of Paddy/Rice in the Coming ASEAN Open Market 2016”. The activity held on 2 November 2015 in the Meeting Room Orchid, Building I at the Ministry of Commerce of the Republic of Indonesia, was attended by representatives of the government agencies, farmers organizations, and NGOs.

This activity aims to gain a more comprehensive feedback on the effectiveness of Government Purchase Price(HPP) refers to a single price which is applied currently, while on the one hand the HPP Multi-quality policy is an option to encourage the growth of rice production and better quality of paddy/rice production, and in other hand introducing a model of business-farm/cooperative of Boyolali Farmers Organic Rice Alliance (APPOLI) and Gapoktan Simpatik of Tasikmalaya is to empower paddy-based farming. This meeting also discussed challenges and opportunities for the development of rice farming in the face of the open market in the ASEAN Economic Community (ASEAN-MEA) and its possibility impact on small farmers in Indonesia.

“The purpose of this focus groups discussion is that based on the facts and the current situation, the policy of Single HPP does not encourage the national rice industry anymore,” Muhammad Nur Uddin, Secretary General of the Indonesian Peasant Farmers Alliance (API) stated.

Meanwhile Harjono, head of sub directorate Bapokstra Ministry of Trade RI (Bapokstra) expressed his hope that from this meeting there will be key points regarding the implementation of policies HPP effective, and getting to know the opportunities and challenges of the agricultural sector in Indonesia is facing ASEAN free market as well,” Harjono explained more. “Furthermore, it would be interesting for us to listen to a discourse based on the quality varieties”.

“Hopefully in this half a day of discussion, we will get a concrete input concerning the application of HPP-Multi variety so as to stimulate excitement in farming,” Harjono, represents the Director of the Bapokstra, added. If there are concrete inputs, he promise to deliver the key points to the Minister of Commerce of the Republic of Indonesia.

Through this activity, API and the Bapokstra of The Ministry of Commerce invite all parties to discuss more focused on the issue of rice and the national rice policy. The FGD was attended by multi-stakeholders and experts, among others were representatives of the Ministry of trade, Ministry of Agriculture, Ministry of finance, BULOG, the Ministry of Coordinator of Economy, farmer organizations, NGOs and experts. There were results of researches conducted by API in cooperation with two research institution such PSEKP and LIPI. The researches were on “Increasing
Incomes of rice farmers through the implementation of HPP multi-quality and milling quality improvement” and research on “Model of organic rice farming in Gapoktan Simpatik of Tasikmalaya and APPOLI of Boyolali, Penetrating to the global market”.

As it is well understood by all parties that rice is a major food commodities consumed by most of the population in Indonesia. Therefore, the availability of rice will also affect the economic and political stability in Indonesia. In the on-farm sector (agriculture), rise and fall of the price of rice will consequently affect the income or revenue of small farmers, since rice producers in Indonesia is small-scale farmers (at households’ level).

The availability of rice is also bringing a big influence on the lives of the majority of Indonesian people. Actually, the Government through the National Logistics Agency (BULOG) has a strategic role to keep the prices in the market stable, while it has to maintain price stability at the farm level as well. Currently, the system of rice procurement by BULOG still applies the policy of the Government Purchase Price (HPP) with one price, called “HPP of a single price”. The policy is set by the Presidential Instructions (Inpres) regarding the purchase price of rice in husk, known as Government Purchase Price (HPP). This policy has an important impact on the declining growth of farming business of rice in husk or rice in Indonesia for the policy does not provide a rational incentive to farmers and rice mills when they produce good quality of rice, which is premium rice. The current policy of HPP does not reflect the reality of the quality of rice in husk production which are diverse, with a huge diverse of varieties as well.

This situation is in line with the fact found by Dr. Valeriana Darwis, one researcher from PSEKP. He said, “HPP policy HPP is currently no longer an effective way to protect the price at farmers level or consumers, in one hand the intervention of BULOG to the market when the price at the consumer level hikes it has no significant effect. In the other hand, when there is a decline in farm gate prices government intervention for rice procurement by BULOG is also ineffective. This is shown by the low absorption of rice by BULOG, therefore it does not meet the targets set by the government “.

Khudori, one of resource persons added, “The price of paddy or rice in husk and rice industry are interrelated and mutually reinforcing. If one of them is weakened or not taken good care of, then both will be weakened”. Therefore, in order to increase rice production, the government must consider the productivity of rice/rice in husk, the efficiency of production, and the efficiency of the process of drying and milling. He added, “Rice price, rice quality and productivity is not only determined by the level of productivity of dried milled rice per hectare and the efficiency of farming, but also by the efficiency at the process of drying the rice in husk and milling the rice.”

According to Khudhori, the two post-harvest stages will determine the quality and productivity of rice and the efficiency of rice which is reflected in the price of rice. The two post-harvest stages are very closely tied to the performance and condition of the rice milling industry. “The single price policy denies the price dynamics of rice in husk or rice, the existence of premium rice, and market segmentation based on the preference of rice consumers, Khudori explained. In addition, the single pricing policy that has been 45 years applied is not in accordance with the market dynamics, such as the obligation of improvement of the quality of rice in husk or rice, BULOG’s absorption target, and the era of free trade ASEAN Economic Community (ASEAN-MEA). “The single price policy will difficult for government in the intervention price through market operations. With one type of medium quality rice, let alone the old stock of rice, it is impossible for market operations can be effectively dampen price instability on all kinds of quality of rice in the market “.

The FGD then obtained a conclusion that through the implementation of the HPP Multi-Quality Multi of rice in husk or rice will increase farmers’ income. This policy will encourage farmers to increase grain production with better quality through the production of safe inputs for health. Farmers will improve cultivation techniques better as well. While the policy of HPP Multi-quality of rice will encourage traders/millings to increase the production of quality rice through better milling process.

Facing the ASEAN single market, Indonesian farmers should be able to compete with farmers in other ASEAN countries. In addition, the free market (ASEAN-MEA) as an opportunity for Indonesia to market their products to ASEAN market, it can also be a threat to Indonesian farmers. Therefore, in this FGD all parties agreed the importance of empowering small farmers to increase their competitiveness through quality production.

Organic rice is one example of the production of good quality of rice, produced through sustainable farming patterns. Organic rice production of the Association of Organic Rice Farmers (APPOLI) and the Cooperative Tresno Boyolali-Tani and Gapoktan Simpatik of Tasikmalaya can penetrate the European market, and provide organic rice products in the country as well. Innovations adopted by the Organization of the farmers indicate that if rice farming is handled well, supported by the right policies, proper infrastructure, such as good irrigation, then it will make the possibility for Indonesia to become a major player in the marketing of quality of rice in the global market.

Related to that issue, a representative from The Center for Policy of National Budgetary Agency and Coordination of Board Fiscal (APBN BKF) of the Ministry of Finance of the Republic of Indonesia said, “The government, especially the Ministry of Finance has been considering fiscal policy to divert subsidies from input subsidy to output subsidy”.

This opinion was directly responded by Muhammad Rifai, head of the Department of Production Management and Business of API, “Fiscal policy is essential to encourage farming, but switching the input subsidies to output subsidy in the current conditions would make it difficult for farmers, where the subsidy will only benefit the merchants and it will trigger a surge in prices at consumer level.

We need to bear it in mind that farmers are also net-consumers, Rifai reminded the audience. “The shifting of input subsidy to output subsidy must be in line with the readiness of farming business institution as buffers to the situation, such as BUMD (Villages’ Business Agency) of food in each region and the development of agricultural cooperatives. Both economic institutions must be connected with production activities of the farmers’ organizations or groups of farmers. Otherwise, it becomes big difficulties for farmers,” added Rifai.

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