PUBLIC CONCERN ABOUT PRICE HIKES RISING

By Andi Abdussalam

Jakarta, July 19 (ANTARA) - The upward trend in commodity prices in the face of the fasting month of Ramadhan and the electricity tariff rate hikes has led many quarters to voice concern about the possibility of economic turmoil and to call  for market operations to prevent inflation from rising to an undesired level.          "The government needs to watch and take anticipatory steps over the upward trend in the prices of basic necessities following the electricity tariff hikes," chairman of the Board of Directors of the Center for Information and Development Studies (CIDES) Ricky Rachmadi said.          Besides, the price increases are likely to boost inflation. Therefore, the government needs to revise its inflation target because in the coming two months prices of basic necessaries will continue to increase.          "It is difficult to resist inflationary pressures in the coming two months because there are quite many factors that support rising inflation," Prof Eddy Suratman of the Economic Faculty of the University of Tanjungpura, said on Monday.          He said that factors that would affect inflation included the electricity tariff rate hikes, weather conditions, the fasting month and post-fasting month festivities. "Commodity prices will increase in the period of these months so that it will be difficult to maintain the inflation target of 5.3 percent," he said.           At present, prices of food commodities are showing an upward trend to a level within the range of between 11 and 30 percent.          According to Ricky Rachmadi, President Susilo Bambang Yudhoyono needs to ask his economic ministers to take anticipatory steps in the face of a possible national economic turmoil as a consequence of the  raise in the the basic power rates.          In order to maintain price stability, legislator Halim Kalla of Commission VII of the House of Representatives for research and technology affairs called on the government to help stabilize essential commodity prices so that it would not cause turmoil in society.          "It is important for the government to maintain the stability of the prices of basic necessaries," Halim said at the parliament building.          In response to the voices raised by various quarters over the possibility of higher-than-expected inflation  following the power rate hikes, President Susilo Bambang Yudhoyono called on commodity producers not to raise their production cost unreasonably due to the power rate hikes.          He said he would reprimand businessmen who  manipulated the power rate hikes by doubling their production cost. "I will not hesitate to warn those who increase without heart the production cost of their goods and services beyond the limits of propriety," the President said when opening a limited cabinet meeting on economic affairs at the presidential office on Monday.          He said that he  would order field checks at a number of companies to ensure that no deviations were made by companies with regard to the basic electricity tariff hikes which were set at an average of 10 percent or 18 percent at the most for industries.         The head of state also called on the relevant ministers to ensure  that they would not make decisions that would put a further burden on the people in connection with the tariff increases.          The government had decided to raise the basic power rates by an average of 10 percent effective July 1, 2010. The government said the increases would not exceed 18 percent.          In the meantime, food and beverage industries have expressed their commitment not to raise their prices until the post-fasting month festivities. "There will of course be an effect of the power rate hikes, but large scale industries are still able to survive because they still have raw material stocks for one to two months," Indonesian Food and Drink Business Association (GAPMMI) chairman Adhi Siswaja Lukman said.          He said that food and beverage businesses would do their best not to raise prices until the fasting month of Ramadhan and the Lebaran festivities which would fall in August and September this year.          The GAPMMI chairman expressed hope that the weather would soon improve so that supplies of several raw materials such as chili and onions whose prices were on the rise due to shortage of supplies would soon return to normal. However, he said, if the supply stability continued to be disturbed due to the weather factor, industries would be forced to raise the prices of their products in the coming two or three months.          "Prices could be raised by 10 percent to 15 percent. It could not be more than that because otherwise it would affect sales," Adhi said.          Of late, the prices of several commodities such as chili, onions, eggs and chicken meat have shown a rising trend. The price of chili which was usually Rp18,000 - Rp20,000 per kg now has reached Rp35,000 - Rp40,000 per kg.          In order to maintain price stability, the government will soon launch market operations.   "We have ordered market operations. The market operations have been changed so we do not need to await a price difference of up to 10 percent to launch them," Coordinating Minister for Economic Affairs Hatta Radjasa said on Sunday.          But if the prices showed an upward trend the National Logistics Board (Bulog) would be authorized to launch market operations soon, he said.          According to Trade Minister Mari Elka Pangestu, the government is to give  State Logistics Agency (Bulog) freedom to intervene in the rice market  to reduce rice price volatility in the runup to Ramadhan (Muslim fasting month).          "We are going to give  Bulog the liberty to conduct rice market operations as already indicated by Coordinating Minister for Economic Affairs Hatta Rajasa," Trade Minister Mari Elka Pangestu said.          Bulog now has a stock of 500,000 tons of rice  for market operations, and the volume was considered sufficient to overcome any extreme price fluctuation. "Rice market operations are still an effective instrument and 500,000 tons of rice is not bad and it can overcome a price increase of  8-10 percent," Pangestu said.          However, according to Eddy Suratman, the commodities whose prices were expected to increase were not only those which could be controlled by the government such as sugar and rice. "With regard to rice and sugar, the government can conduct market operations to normalize increasing prices," he said.          But the prices of other commodities such as chili, red unions and garlic would fast fluctuate while these commodities could not be kept in storage for a relatively long time.          He suggested that the government in the short term launch market operations while in the long run it should put in order the distribution networks because the distribution lines so far were too long.          "This condition creates high cost economy because Indonesia still lacks  an efficient distribution system," he said.***2*** (T.A014/A/HAJM/18:05/a014) 19-07-2010 18:29:1