07/05/2009 (Jakarta Globe) - The government will effectively float the price of its inexpensive Minyakita packaged cooking oil for the poor, adjusting the price against the market every month, Bayu Krasnamurthi, deputy to the coordinating minister for economic affairs, said on Thursday.

Accordingly, the price will rise to Rp 7,000 (70 cents) per liter from Rp 6,000 from Saturday through June 9, at which time a government evaluation committee would meet to readjust the price based on the global crude palm oil price, Bayu said.

However, the price increase may not do much to help put the scheme back on track, with Bayu acknowledging only a derisory 800 liters of cheap oil had been distributed nationally to the poor in the first three months, out of a target of 1 million for the year.

The House of Representatives previously rejected a government proposal to indirectly subsidize Minyakita by eliminating the value-added tax on it.

“The price will be adjusted every month in line with global crude palm oil prices. So if these fall next month, we’ll cut the price of Minyakita also,” Bayu said.

Wielding corporate social responsibility arguments, the government hammered out an agreement with 10 oil producers to supply a million liters per year to the scheme, to be sold directly to the poor at a set price. However, the producers are now unwilling to supply oil at such low prices, given the rebound in global crude palm oil prices, which have risen from about $350 a barrel at the start of the year to about $700 a barrel currently.