Industry experts say the situation is compounded by the State Logistics Agency (Bulog) continuing to stockpile the staple food at higher prices and the government stepping up enforcement against illegal rice mixing.

Maudey Khalisha – The Jakarta Post

JAKARTA – Local rice millers have been under pressure due to the narrowing gap between the government’s price ceiling, farm gate prices and retail prices for the grain, with many reducing or halting operations as profit margins narrow, leading to supplies tightening and market prices creeping above the cap in recent months.

Industry experts say the situation is compounded by the State Logistics Agency (Bulog) continuing to stockpile the staple food at higher prices and the government stepping up enforcement against illegal rice mixing.

According to the Indonesian Rice Millers and Traders Association (Perpadi), the mismatch between procurement and pricing has disrupted the country’s rice supply chain.

The government purchase price (HPP) for unhusked rice was increased in February, but the retail ceiling price (HET) was only adjusted months later. This policy gap wiped out workable margins, especially for small and medium-sized rice millers, leaving many unable to sustain production.

“The government raised the HPP from Rp 6,000 [36 US cents] to Rp 6,500 per kilogram, but the HET was left unchanged [at Rp 12,500 per kilogram]” in February, Perpadi head Sutarto Alimoeso told The Jakarta Post on Sept. 16.

“Since the old HET was based on the old benchmark, the adjustment created an obvious gap” in margins for millers, he added.

Perpadi also said Bulog’s aggressive buying deepened the squeeze instead of stabilizing the market, noting that during the year’s first harvest season, the agency absorbed up to 3 million tonnes of rice, creating additional competition for millers.

“Millers cannot operate if the price of dried harvested rice goes above Rp 7,000 per kilogram, yet in reality it has reached as high as Rp 8,000,” Sutarto said.

Even after the new HET of Rp 13,500 per kilogram was issued in August for almost all regions, Bulog only stopped purchasing grain in early September, he said.

Ayip Said Abdullah, national coordinator of the People’s Coalition for Food Sovereignty (KRKP), also said Bulog’s stockpiling activity was disrupting the domestic rice industry, which was dominated by small rice milling outfits at nearly 95 percent.

He also pointed to delays in government intervention, saying the food supply and price stabilization (SPHP) program was launched too late.

“From January to May, only small volumes were released. From May to July, everything was held back until the government announced record stocks,” Ayip said on Tuesday during a discussion titled “Rice price and food policy controversy amid the climate crisis”.

Prices had already climbed by the time the rice was released and market operations had come too late to cool them down, he added.

Retailers are prohibited from selling rice above the HET, yet actual prices at traditional markets and informal shops often climb well beyond the government-mandated limit.

“Market operations could no longer contain [rising prices]. They didn’t have any effect. The volumes released were also too little,” Ayip said.

According to him, the supply crunch was worsened by intensified crackdowns by law enforcement, which increased pressure on millers.

In August, police named more than 200 rice traders as suspects for allegedly mislabeling mixed medium-quality rice as premium rice. For weeks afterward, major producers suspended distribution to supermarkets. Combined with high grain prices and tight margins, the wave of crackdowns pushed more mills to halt operations.

Ayip added that even farmers had gained little from the situation. Although the HPP was raised to Rp 6,500 in February, giving farmers a temporary boost, rising fertilizer, labor and pesticide costs had eroded net incomes.

“Farmers are treated as instruments of production,” he said. “They are pushed into multiple planting cycles with little regard for soil health or sustainability. When prices collapse, they bear the losses.”

Bhima Yudhistira, executive director of the Center of Economic and Law Studies (Celios), attributed the steady climb in rice prices not only to supply mismatches but also structural overreliance on the staple food, warning that the national food system was trapped in a rice-first mindset.

More than 70 percent of the Agriculture Ministry’s budget went to rice, sidelining local staples such as sago, cassava, corn and fish that could help cushion inflation and shortages, Bhima noted.

According to him, this dependency on rice leaves the entire system vulnerable because when rice falters, hunger deepens and opportunities to build resilient local food systems are overlooked.

“If we break down inflation, the biggest contributor is always volatile food, particularly foodstuffs,” Bhima told the discussion on Tuesday.

“But why is the focus only on rice? This is what the government has been pushing, especially under President Prabowo Subianto , that the indicator of food security is simply the rice supply, which they claim is more than sufficient or even in a surplus,” he said.

However, Home Minister Tito Karnavian said the government remained confident in its efforts, citing the SPHP program’s daily distribution capacity of up to 7,400 tonnes of rice through affordable food schemes in collaboration with Bulog, the Agriculture Ministry and the National Food Agency (Bapanas).

“Rice prices have risen in 105 regencies and cities. Previously, I observed slight increases in 214 regencies and cities, but then we carried out market operations with Bulog rice across all regions,” the minister said on Thursday, as quoted by CNBC Indonesia.

Published Date: September 23, 2025