Jakarta. The Business Competition Supervisory Commission, or KPPU, has revealed that the government owes cooking oil producers and retailers Rp 1.1 trillion ($74.7 million) in unpaid subsidies applied early last year.

The government mandated producers and retailers to sell cooking oil at Rp 14,000 per liter during a severe shortage last year with a promise that the financial losses would be repaid with the state budget.

The amount resulted from the differences between the government’s “economical price” and the actual market price.

“The losses suffered by edible oil producers and distributors amount to more or less Rp 700 billion, and an additional loss of Rp 344 billion on the retailers’ side,” KPPU Economic Director Mulyawan Ranamanggala said in a recent press statement.

“The claim of payment in January 2022 totaled Rp 1.1 trillion.”

Under a trade minister regulation, the government agreed to subsidize producers and retailers to keep the price of cooking oil at Rp 14,000 per liter last January, when the market price hovered above Rp 20,000.

The government’s ceiling price, which was used as the threshold to calculate the subsidy, was Rp 17,260 per liter. 

"We noted that the government ceiling price was below the January 2022 average price average, which stood at Rp 20,914 – quite a significant discrepancy," Mulyawan said.

A problem arose after the ministerial regulation was repealed and sitting Trade Minister Zulkifli Hasan said recently he would not repay the claim without any legal ground.

Mulyawan said he remains confident that the government will eventually repay all the debts.

"It’s unlikely that the government will not repay … because its cooking oil management relies heavily on businesses," he said, adding that the commission recommends the government settle this issue immediately to ensure the rule of law and avoid negative sentiments toward the country’s business climate.

“We advise that the government, particularly the Trade Ministry, issue a regulation on the repayment of those debts which have been verified in October 2022,” Mulyawan said.

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