13/01/2009 (Reuters), Jakarta - Indonesia will cut by a huge 60 percent the cash it gives poor families this year as aid to buy cooking oil, because of a fall in palm oil prices, Trade Minister Mari Pangestu said on Tuesday.

The price of cooking oil, which fluctuates in line with the price of crude palm oil (CPO), the raw material used, has fallen to around 8,000 rupiah ($0.72) per litre this year from a peak of 13,000 rupiah per litre in 2008.

Indonesia is the world's largest producer of crude palm oil, and is expected to produce 20.25 million tonnes of the commodity this year, against 18.8 million in 2008, the industry association estimates.

The government, which has to face elections this year, will pay only 1,000 rupiah for one litre of cooking oil to be purchased by a poor family this year, compared to 2,500 rupiah per litre in 2008, Pangestu said.

The government will also cut the volume of cooking oil a poor family can buy with the aid, to one litre per month from two litres in 2008, she said.

"Our survey shows that poor families consume 0.87 litre of cooking oil per month on average," Pangestu said.

The number of poor families in Indonesia would drop to 18.2 million this year from 19.1 million in 2008, she added.

Besides the cash as aid, the government will also sell around 50,000 tonnes of subsidised cooking oil, with the brand name "MinyaKita", to poor families from this month, she said.

The subsidy will be given to refiners selling cooking oil at a price of 6,000 rupiah per litre.

Cooking oil is not a major component in Indonesian consumer inflation but its high usage by the poor means any sharp price increases have the potential to trigger social unrest. So the government usually tries to stabilise the price.

Indonesia consumes about 4.5 million tonnes of cooking oil each year on average. ($1=11,075 rupiah)