ICC RECOMMENDS THAT TRADE MINISTER MAKE ADJUSTMENT TO THE PRICE OF COOKING OIL
Jakarta (9/9) – Indonesia Competition Commission (ICC) has recommended that the Ministry of Trade of the Republic of Indonesia make adjustment to the Highest Retail Price (HET) of bulk cooking oil or simple packaged cooking oil to a value of below IDR14,000 per liter, precisely in the range of IDR12,000 per liter for bulk cooking oil or simple packaged cooking oil and IDR17,000 per liter for premium packaged cooking oil. ICC through its Chairman made such recommendation through a letter of suggestion and consideration No. 110/K/S/VIII/2022 regarding Suggestions and Considerations with regard to Cooking Oil Prices to the Minister of Trade of the Republic of Indonesia on August 4, 2022. This price adjustment can be made for the price of crude palm oil (CPO) has decreased as compared to that of July 2021 and this also refers to the price of CPO and the ratio between the prices of fresh fruit bunches (FFB) and cooking oil in the June - July 2021 period.
ICC, as everyone knows, has actively conducted supervision and is currently conducting law enforcement on alleged violations of laws in the cooking oil sector since last year. In its oversight processes, ICC found that if referring to the data on price fluctuations of FFB-CPO-cooking oil up to August 2022, the fluctuations in CPO prices (international and domestic) have relatively been stable approaching the price fluctuations for the July 2021 period. However, to date the data shows that the price of cooking oil has yet to show a substantial decrease both for premium packaged cooking oil and bulk cooking oil (simple packaged one).
Such huge price differences between CPO and cooking oil can be analyzed through the ratio of prices of CPO-premium packaged cooling oil and simple packaged cooking oil. As from June to August 2022, the average CPO prices at PT Karisma Pemasaran Bersama Nusantara (KPBN) as the reference price for cooking oil producers, were recorded in the amount of IDR9,900 per kilogram, with a ratio of the price of CPO to that of premium packaged cooking oil reached 2.4x – 3x. In the meantime, the ratio of the price of CPO to the that of simple packaged cooking oil reached 1.6x – 1.9x. The CPO price range was relatively the same as that of the June-August 2022 period in the first semester of 2021. Meanwhile, the ratio of the price of CPO to that of premium packaged cooking oil was only 1.5x – 1.7x in 2021 and the ratio of the price of CPO to that of simple packaged cooking oil was 1.3x – 1.5x, lower if compared to that of in 2022. This shows that the margin of cooking oil business actors can still be categorized as high.
Based on the comparison of ratios, the increase in cooking oil prices is not proportionate with the price of FFB. The increasingly wider FFB-cooking oil ratio shows that oil palm farmers are not benefiting from the increase in the prices of CPO and cooking oil. With the current price of FFB, the price of cooking oil should have been lower or with the current price of cooking oil, the price of FFB should have increased. Currently, the average price of cooking oil in the June-August period is IDR17,350 per liter. With such price, the price of FFB should have been able to reach IDR 2,500 per kg.
ICC by taking the ratio of prices of CPO-cooking oil into account is of the opinion that the reference price for the highest retail price of simple packaged (bulk) cooking oil can be reduced up to the range of IDR12,000 per liter. The decrease in the highest retail price for simple (bulk) cooking oil is expected not to result in the decrease of the price of FFB at farmer level. This decline will have positive impacts on containing the inflation rate, particularly on volatile foods in the aftermath of the issuance of the policy on the increase of fuel prices. The price reduction will also benefit community members using simple (bulk) cooking oil who generally have to face the current price increase.