JAKARTA, Dec 2 - - Indonesia will suspend the import duty for rice imports done by state procurement agency Bulog to ensure the grain can be sold cheaper to the domestic market and ease the cost burden on the agency at a time of high prices, the trade minister said on Thursday.
The government has allowed Bulog to import rice this year as its stocks are inadequate and high domestic prices have prevented it from building them up. The trade ministry has asked the finance ministry to cancel the duty for rice imports until February next year, when the rice import permit expires, Trade Minister Mari Pangestu said. It was not immediately known if the suspension of import duty will be lifted after February, or when the duty will be restored.
"By scrapping the import duty, we expect landing price for rice imports will be lower. It will help ease financial pressure on Bulog," Pangestu told reporters.
The suspension of import duty may affect Bulog's tender to import 100,000 tonnes of premium 5 percent broken Thai rice for February delivery, which has yet to be awarded.
Rice imports are currently subject to a duty of 450 rupiah per kg.
While Bulog imports rice at market price, the agency -- in charge of staple food stocks for the government and undertakes market operations such as selling the grain when prices are too high or buying from farmers when prices dip below certain levels -- must sell the grain at subsidised price.
The state agency sells subsidised rice to poor families at 1,600 rupiah($0.177) per kg, compared to the market price for medium rice at 7,000 rupiah per kg.
The country's food subsidy bill last year was 13 trillion rupiah ($1.4 billion) and 13.9 trillion rupiah in 2010, while for next year the government plans to spend 15.3 trillion.
The increase in food subsidy for this year was due to the increase in rice prices, even though the allocation of subsidised rice in 2010 fell to 2.97 million tonnes, from 3.33 million tonnes in 2009.
