TEMPO.CO, Jakarta - If the problem of the recent rise in the price of rice is not managed properly and seriously it can become the cause of a new crisis, because this can lead to a surge in the cost of other basic commodities. We know this can hit the people hard, particularly those in the lower-income bracket. A 2011 study by the Asian Development Bank showed that every time food prices go up by 10 percent, the number of poor people in Asia-including in Indonesia-increases by 64 million.
Unfortunately, higher prices do not necessarily mean good news for the producers. It just adds to the farmers' many burdens, because most farmers in this country are small landholders, cultivating an area of less than half a hectare. Their harvests tend to be just enough for their own consumption. They are practically net rice consumers, having to buy supplies for their own daily needs.
Perhaps this net consumer phenomenon is what the government neglected to factor in when analyzing prices. The Agriculture Ministry estimated in January that about 600,000 hectares of rice paddies produced five million tons of rice. Assuming this is true, with national rice consumption at about 3.5 million tons a month, we should be enjoying an excess supply of rice.
In such a case, according to the law of supply and demand, the price of rice should be going down. But at the markets, prices have gone up by 20-30 percent. Admittedly, there is a problem of unequal distribution, but this should be a temporary problem. In February, despite government claims of two harvests compared to the previous month, the price of rice kept going up.
If it is true that actual production is higher than consumption, there must be other reasons for the rising price of rice. It may well be that the initial estimates of the rice harvest was wrong, or perhaps the estimated acreage of rice paddies was invalid. Another possibility could be the local government's omission of rice paddies which failed to reach their targeted harvests. We should not be surprised at how some harvest reports can be exaggerated while those of failed crops tend to be diminished.
In other words, relying on the production of domestic rice to lower prices at the local markets is a high-risk policy. It turns out that this year's two-month harvest was unable to lower prices. If the government persists in waiting for the March rice harvest, estimated to be over 20 million tons, the people in the low income bracket will suffer the most because the price of rice is unlikely to come down. It would be dangerous for the government to gamble on the people's stomach.
As such, the government must side with most of the people. There is no other way. The supply of rice must be guaranteed, at a price affordable to the majority. The government should not be averse to importing rice, if it is certain that local production cannot bring down prices. The yardstick should be easy enough to calculate: when the price of certain types of rice exceeds set prices, that would be the time to allow imports. This formula was applied with a modicum of success by the administration of President Susilo Bambang Yudhoyono.
The Joko Widodo government's goal of achieving self-sufficiency within three years is commendable. But one fact to be considered is that domestic rice production has been on the slide from year to year. Without any significant breakthroughs, like new technology or major investment in rice production infrastructure, those noble intentions will be nothing more than an illusion. (*)
