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Cooking Oil Price Rocketing: Agribusiness Model Mistake

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The increasing price of cooking oil until this moment (Thursday, 14/06) is not natural, but it’s not something that happen out of the blue. According to Federation of Indonesian Peasant Union (FSPI), the phenomena happen due to the agribusiness model-especially the palm oil commodity in Indonesia that is not taking the side of small peasants and consumers. Palm oil agribusiness in this country has been controlled for a relatively long period by the agribusiness model with its neoliberal-capitalistic character. Cooking oil is one of the nine basic necessities that are very much needed by the people. Instead the agribusiness model is creating an oligopoly structure. Big entrepreneur easily taking the control of market mechanism from upstream to downstream, and making the situation of the poor is getting more miserable. FSPI recorded, that almost the entire production process of cooking oil is not controlled by the state (it’s very contradictive with the state’s constitution, especially article 33 point 3 of the 1945 Constitution). It made the government intervention to stabilize cooking oil price become ineffective, because the government do not have any supply! The production of cooking oil in this country only owned by very small group of beneficiaries, the group control from the land ownership to the refinery industry. Private sector control 4 million hectares of land (around 67 per cent), and the people only own 1,9 million hectares (around 33 per cent). Huge palm oil plantation owned by PT Astra Agro Lestari, Sinar Mas Group, PT London Sumatera, PT Minamas Gemilang, PT Asian Agri, PT Duta Palma, PT Bakrie Sumatera Plantation, PT Salim Ivomas Pratama, PT Surya Dumai. Some of the giant company above also own refinery industry for cooking oil procession. Government’s point of view to let the price controlled by market mechanism obviously a big mistake. These huge companies cartel control the price domestically and internationally, because Indonesia is one of the CPO’s major players in the world. Based on the demand and supply margin, these companies (besides the players from Malaysia as the leader of the world palm oil market) have power over the price and the supply. As a consequences, with the market fluctuation marked by an increasing demand over these past few months, their claws of domination can penetrate deeper. The highest CPO price in history (870 US$ per metric ton) certainly can only be enjoyed by the owner of major companies and factories. Meanwhile TBS price (Tandan Buah Segar/ Fresh Palm Oil Stem) is still fluctuating in several regions. Small scale-family based palm oil farmers who only own 1 to 2 hectares of land like in Jambi for example, only receive TBS price around Rp 900 to Rp 1050 per kilogram. They are evidently do not receive any benefit from the sky-rocketing CPO and cooking oil price. On the contrary they are detriment because they still have to buy cooking oil with high price. In various regions of FSPI members in the countryside, the price of cooking oil is still very high around Rp 8.750 tp Rp 10.500. The government solution that only count from”companies generosity” could not do any good. PE (Pajak Eksport/Export Tax), DMO (Domestic Market Obligation) and PSH (Program Stabilisasi Harga/Price Stabilization Program) becoming unsubstantial when on the reality cooking oil supply is not on the hands of the government. It would be far better if government agency with PSO (Public Service Obligation) function to constantly stabilize nine basic necessities, including cooking oil. Few years ago, Bulog is no just in charge with rice, but also cooking oil as on of the nine basic necessities. It can be a lesson as one of the control form and the state’s role for the people’s food sovereignty. The positive impact is evident, control can be hold by the government, not entirely given to the market that are dominated by a small number of giant companies. The effect of this oligopolistic agribusiness model is clear: That the people will always be the side that is being harmed!