An Analysis of Rice Management in Indonesia: From Law

Enforcement Perspective to PT Indo Beras Unggul

Sandi Nugroho

, Ningrum Natasya Sirait

, Bismar Nasution

and Dani Sintara

Student of Doctoral Program in Law, University of Sumatra Utara, Jl. Abdul Hakim No. 4, Medan, Indonesia

Lecturer of Doctoral Program in Law, University of Sumatra Utara, Jl. Abdul Hakim No. 4, Medan, Indonesia

Keywords: Law Enforcement, PT IBU, Rice Management.

Abstract: In 2017, the Indonesian government subsidized IDR32.5 trillion for agricultural sector, including seed and

fertilizer subsidy for rice. This is due to the Government’s duty to maintain the rice price because rice is

often used by business actors as an object to seek more profit in a way contrary to the rules and regulations,

such as the case of PT Indo Beras Unggul (PT IBU). In that case, the suspect TW is considered responsible

for a number of frauds that mislead the consumers. The deceitfulness is proved through the quality indices

of Nutrition Adequacy Ratio (NAR) table which says the percentage of nutrient requirement can be fulfilled

if the rice is consumed. This study shows that: 1) The national rice production management has not been

properly performed which opens an opportunity for bad business actors to get more profit; 2) Law

enforcement against PT IBU conducted by the Police of the Republic of Indonesia is the ultimate resort

(ultimumremedium); 3) Unlawful act committed by PT IBU was followed by other companies. However,

since there was a legal action against PT IBU, other companies stopped such activities.

1 INTRODUCTION

As an agrarian country, Indonesia is endowed with

abundant natural resources in addition to its highly

strategic position. Geographically, Indonesia lies in

the tropical zone with such high rainfall that many

types of plants can survive and grow quickly. Some

Indonesian people obtain their livelihoods from

agriculture or farming. Agricultural sector in

Indonesia produces a wide range of export

commodities including rice.

In 2017, the Indonesian government subsidized

IDR32.5 trillion for agricultural sector, comprising

IDR1.3 trillion for seed and soybean and IDR31.2

trillion for fertilizer (Director of National Budget

Arrangement, 2017). Through such a very large

amount of subsidies, the Government intends to

reduce the operational costs of farmers and togeta

maximum rice production.

In addition to maintaining national rice

production, the Government must also maintain the

price, which is intended to maintain the inflation rate

caused by staple goods. Rice is often used by

business actors for more profit gain.Based on the

data in 2016,producing 79.3 million tons of rice

from the dry unhusked rice (GKG) requires around

IDR278 trillion. The selling price from farmers to

traders is IDR352.7 trillion, so farmers earn a profit

margin of IDR65.7 trillion. If such amount is

distributed to 56.6 million farmers from 14.1 million

rice farming households, then each of them will only

earn a profit margin of 1 to 2 million rupiahs per

year. While on the downstream side, consumers buy

medium-class rice from intermediary traders or

middlemen on the average of IDR10,582/kg

equivalent to IDR488 trillion. Thus, the profit

margin earned by the intermediary traders or

middlemen after subtracted with the purchasing cost

is at IDR133 trillion. There are about 400 thousand

intermediary traders or middlemen, so each of them

gets a profit margin of about IDR333 million

(Santosa, 2018)

The distribution of profit margin amongst these

actors does not contain justice values, and becomes

one of the problems in the rice trading system in

Indonesia where middlemen get a large amount of

profit,but producers get a very small amount. Such

calculation only involves the price of medium rice.

The profit margin will even get higher for premium

rice or packaged rice because people pay more for

that type of rice. The price of premium/packaged

rice in the modern market is on average of more

Nugroho, S., Sirait, N., Nasution, B. and Sintara, D.

An Analysis of Rice Management in Indonesia: From Law Enforcement Perspective to PT Indo Beras Unggul.

DOI: 10.5220/0010090816111616

In Proceedings of the International Conference of Science, Technology, Engineering, Environmental and Ramiﬁcation Researches (ICOSTEERR 2018) - Research in Industry 4.0, pages

1611-1616

ISBN: 978-989-758-449-7

1611

thanIDR20,000/kg. Business actors of

premium/packaged rice are willing to buy the grain

at a slightly higher price. Then,they process it using

a certain machine and pack itto be sold as premium

rice with a very high price. Such practice is

conducted by PT Indo Beras Unggul (PT IBU)

(Movanita, 2017).

In PT IBU case, the suspect TW is considered

responsible for a number of frauds that mislead the

consumers. The deceitfulness is proved through the

quality indices of Nutrition Adequacy Ratio (NAR)

table which says that the percentage of nutrient

requirement can be fulfilled if the rice is consumed.

Necessarily, the rice composition should be stated in

the label, not the NAR table, because the NAR table

is only presented in ready to consume processed

food packages (Movanita, 2017).

In addition, there is a problem in the 2008 edition

of Indonesian National Standard (SNI) label in the

packaging. PT IBU claims their product as premium

rice. As a matter of fact, the provisions of SNI 2008

defines that the quality of rice is determined by

Quality Level indicators from 1 to 5. Meanwhile,

medium and premium rice indicators are defined in

the SNI of 2015 edition. After passing a laboratory

test, the quality of PT IBU rice is below the good

quality level. The quality is not comparable with the

price set for Maknyuss brand (IDR13,700/kg) and

Ayam Jago brand (IDR20,400/kg). Moreover, the

two brands did not also include PT IBU as the

manufacturing company on the packaging. It says

PT Sakti as the manufacturer. Against such deeds,

the suspect TW is imposed with Article 382 of the

Criminal Code on Fraud and Article 144 in

conjunction with Article 100 paragraph (2) of Law

Number 18 of 2012 on Food. Furthermore, the

suspect TW is also imposed with Article 62 in

conjunction with Article 8 paragraph (1) e, f, g or

Article 9 h of Law Number 8 of 1999 on Consumer

Protection (Movanita, 2017).

Against the deeds of the suspect TW, the Public

Prosecutor at the trial in the Bekasi District Court

has filed a lawsuit of two years imprisonment

(Nugroho, 2018).Then, the judges stated that the

defendant TW has been proven legally and

convincingly committing a fraudulent crime in the

rice label and pronounced a year and four months

imprisonment. The basis of judges’ consideration is

that it has been completely proven by the law before

the trial that PT IBU has produced and traded

Maknyuss and Ayam Jago rice with the quality that

did not match to the quality as listed. In addition, the

incriminating factor was that the defendant’s actions

are considered to have harmed the people

(Noersativa, 2018).

The problem of this research is formulating into

question: how rice management in Indonesia: from

law enforcement perspective to PT Indo Beras

Unggul?

2 RESEARCH METHODOLOGY

This was a normative juridical research using a

descriptive analysis as the method. The data were

secondary data taken from primary, secondary and

tertiary legal materials. The secondary data were

collected through a literature review and a field

study. Then, the data were analyzed using a

qualitative analysis method.

3 RESULT AND DISCUSSION

3.1 Government Policy in Rice Trading

in Indonesia

3.1.1 Policy of Ministry of Agriculture of the

Republic of Indonesia on Rice

Commodity, Rice Import Policy versus

Food Self-sufficiency Policy

Food self-sufficiency is a state in which a country is

able to fulfill its own needs for food. In 1980s,

Indonesia had achieved food self-sufficiency,

although it was only for rice self-sufficiency.

However, in the current reform era, the economic

sector has been colored by socio-political factors

that make food self-sufficiency policy begin to be

neglected. As a result, until today food self-

sufficiency in Indonesia cannot be fulfilled. This is

due to the fact that the government continues

applying import policies (National Development

Planning Board, 2011).

In addition, the government budget does not

favor the agricultural sector. Incapability of food

self-sufficiency happens due to some inhibiting

factors, such as reduced land for farming due to

more widespread buildings, imported foreign

products with a better quality, less quality seeds,

reduced number of farmers, unpredictable weather,

increasing price of fertilizers and so forth. As a

matter of fact, Indonesia almost achieves rice self-

sufficiency, but the government continues applying

import policies (Deliarnov, 2006). Responding to the

previously mentioned facts, if Indonesia wants to

ICOSTEERR 2018 - International Conference of Science, Technology, Engineering, Environmental and Ramiﬁcation Researches

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achieve food self-sufficiency, the Government must

pay more attention to the farmers’ welfare. The

government should also expand agricultural land.

Nevertheless, itis not only the government’s duty, all

of Indonesian people should also take a part to

support the domestic production, and should not be

too proud of imported products. Furthermore,

Indonesian people must be satisfied with the quality

of their own products, which can therefore help

increasing the farmers’ welfare. As Indonesian

people, we must always support, improve and

upgrade our own domestic production.

3.1.2 Policy of Ministry of Trade of the

Republic of Indonesia on Rice

Commodity

The policy of the Ministry of Trade on rice

commodities defines the Highest Retail Price (HRP)

of Medium and Premium Rice applicable to

traditional and modern markets. In Java, Lampung,

South Sumatra, Bali, West Nusa Tenggara and

Sulawesi, the HRP of Medium Rice is at

IDR9,450/kg and Premium Rice at IDR12,800/kg.

Meanwhile, in Sumatera areas (excluding Lampung

and South Sumatera), Kalimantan and East Nusa

Tenggara, the HRP of Medium Rice isat

IDR9,950/kg and Premium Rice at IDR13,300 due

to leniency of distribution cost as much as

IDR500/kg. In Maluku and Papua, the granted

leniency of distribution cost isat IDR800/kg, so the

HRP of Medium Rice is at IDR10,250/kg and

Premium Rice at IDR13,600/kg (Press Release of

Public Relation Bureau of Ministry of Trade of the

Republic of Indonesia, 2017).

Enggartiasto Lukita, the Minister of Trade, states

that “The determination of HRP is intended to

control the price which recently tends to increase.

With this HRP, consumers get a price certainty and

keep their purchasing power. In addition, rice HRP

can also prevent price speculation” (Setiawan et.al,

2018).

3.2 Law Enforcement against PT Indo

Beras Unggul (PT IBU)

3.2.1 Case of PT IBU

Food Task Force Team,composed of Investigators of

Detective and Crime Agency of Indonesian National

Police, Ministry of Agriculture of the Republic of

Indonesia and other related institutionsestablished in

January 2017,had succeeded in raiding PT Indo

Beras Unggul (PT IBU) in Kedungwaringin, Bekasi

Regency. The raid is related to the violation of the

selling price stipulated by the Government of the

Republic of Indonesia. The Minister of Agriculture

said, “The Company (PT IBU) put on a high selling

price that clearly harms the consumers and the

public. In addition, the purchasing price from the

farmers is very cheap. PT IBU bought government

subsidized rice at IDR7, 000/kg, then sold itat

IDR20,000/kg to consumers. If this continues, the

two parties are mistreated, the farmers and the

consumers”

(https://economy.okezone.com/read/2017/07/28/320/

1745906/mengurai-kusutnya-kasus-beras-oplosan-

pt-ibu-bagaimana-solusinya).

This case becomes more interesting when PT

IBU, as a subsidiary entity of PT Tiga Pilar

Sejahtera Food Tbk (AISA), refused to be said

falsifying the quality of its products(Press Release of

Business Competition Supervisory Commission,

2014).The company used a different measurement

standard from the one defined by the Food Task

Force for determining the category of premium rice.

According to PT IBU, in defining the rice category,

SNI uses rice physical characteristics. Meanwhile,

the Food Task Force set the premium standard based

on the type ofits varieties. PT IBU denied of

producing IR64 rice. However, they claimed of

producing premium quality rice in accordance with

SNI standards (i.e. based on visual parameters),not

the type of varieties.

To obtain grain/rice, PT IBU has recruited

around 3,400 farmer partners scattered throughout

Indonesia who are assigned to purchase grain/rice

from the farmers. In addition, PT IBU also

employees Bulog (Indonesian Bureau of Logistics)

Officers who have many partners by providing them

a larger salary. Forthe price, PT IBU purchases

grain/rice at a higher price (around IDR200/Kg

higher) than other business actors including the

Bulog. Referring to the Regulation of the Minister of

Trade Number 27/M-DAG/PER/5/2017 concerning

Determination of Purchasing Price from Farmers

and Selling Price to Consumers, the price for dry

unhusked rice (GKG)is at IDR4,600/kg and at

IDR7,300/kg for rice. By buying at a higher than the

price determined by Bulog, farmers sell their rice to

PT IBU.

The Bureau of Logistics (Bulog) as a State-

Owned Enterprise (SOE) is also harmed by the

actions of PT IBU. Due to buying the grain/rice

above the price regulated by the government, Bulog

cannot compete with PT IBU. Bulog cannot buy the

grain/rice from farmers for national reserves,

resulting in the decreasing amount of national rice

An Analysis of Rice Management in Indonesia: From Law Enforcement Perspective to PT Indo Beras Unggul

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stocks and inability to meet the stipulated target. If

Bulog pays at IDR4,600 for a kilo of GKG, PT

IBUpays at IDR4,800; and if Bulog pays at

IDR7,300 for a kilo of rice, PT IBUpays at

IDR7,500.

Buying grain/rice with a higher price than

Bulog’s and other small-scale business actors’does

not really affect PT IBU. Since it can process and

package the rice for sale in the modern retails at a

higher price, i.e. IDR20,000 to IDR30,000 per

kilogram.

The greatest losses are certainly experienced by

the public because, as consumers, they must buy the

rice at a very high price. People are deceived by the

promise as stated in the rice packaging label. Itsays

SNI 6128-2008 which certifies the Quality I of PT

IBU rice production especially under the Maknyuss

and Cap Ayam Jago Merah brands. However, based

on alaboratorytest, the quality of Maknyuss is at

Quality III and Cap Ayam Jago Merah at Quality II.

On the packaging, PT IBU presents misleading

information to consumers such as the inclusion of

Nutrition Adequacy Ratio,unusual Nutrition Facts

and unsuitable production sites. The investigation

reports that PT IBU produces 21 brands; and after

the laboratory tests, 20 brands of rice did not match

to the specification as presented in the packaging

label. This is certainly very detrimental to

consumers who bought the rice at a very high price

but a lower quality.

Such practice is mostly conducted by the rice

industry using packaging brands. Almost all

packaged rice in the modern retail are sold at ahigher

price of more than IDR20,000/kg. Imposing penalty

for PT IBU is a good example of law enforcement

that has exactly disrupted the rice mafia in

Indonesia.

3.2.2 Legal Aspects of Business Competition

From the legal aspects of business competition, PT

IBU has violated the Law Number 5 of 1999 on

Prohibition of Monopolistic Practices and Unfair

Business Competition because the selling price (at

IDR20,400/kg) was very much higher than the

purchasing price (at IDR7,500/kg). In the upstream

(purchasing of GKG), there has been a monopoly

practice where PT IBU raised the purchasing price

of grain, i.e.at IDR4,800/kg. Meanwhile, the

permitted price based on the Regulation of the

Minister of Trade Number 27/M-DAG/PER/5/2017

concerning Determination of Purchasing Price from

Farmers and Selling Price to Consumers is at

IDR4,600/kg for dry unhusked rice (GKG) and at

IDR7,300/kg for rice. By buying with a higher than

the price determined by Bulog, farmers sell their rice

to PT IBU.

In the upstream, there has been a fraudulent

practice through monopoly practices by raising

prices that are not in accordance with the provisions.

Such fraudulent practice an harma fair business

competition amongst the business actors of similar

field. Thus, thesmall-scale rice producers are no

longer able to buy at a price that larger-scalerice

producers offer. Small-scale business actors cannot

buy rice higher than the price offered by PT IBU.

3.2.3 Legal Aspects of Consumer Protection

The greatest losses are certainly experienced by the

society because, as consumers, they must buy rice at

a very high price. People are deceived by the

promise as stated in the rice packaging label. It says

SNI 6128-2008, and in the SNI certificate the quality

of rice, especially under the brands of Maknyuss and

Cap Ayam Jago Merah, is at Quality I. However,

after a Laboratory Test, the rice quality of Maknyuss

is at Quality III and Cap Ayam Jago Merah at

Quality II.

In the label, PT IBU presents misleading

information to consumers such as the inclusion of

Nutrition Adequacy Ratio,unusual Nutrition Facts

and unsuitable production sites. The investigation

proves that PT IBU produces 21 brands; and after

the laboratory tests, 20 brands did not match to the

quality presented in the packaging label. This is

certainly very detrimental to consumers who bought

rice at a very high price but with a lower quality.

3.2.4 Aspects of Criminal Law

The criminal law aspects against the deed of the

suspect, the President Director of PT IBU, in

producing rice include:

a. PT IBU produces 21 brands of rice; investigators

have conducted a Laboratory Test to them. Only

1 brand is in accordance with the label, while the

other 20 brands are not in accordance with the

presented quality in the packaging label.

b. PT IBU deliberately produces rice by lowering

the quality. The rice in Quality I is produced in

lower level of quality. For example, Maknyuss

and Cap Ayam Jago brands have a certificate of

SNI 6128-2008. In the certificate, the quality of

the two brands is at Quality I. However, the

laboratory test explains that the quality Cap

Ayam Jago is at Quality II and Maknyuss at

Quality III.

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c. PT IBU commits a retail company fraud by not

implementing the agreement as stated in the

contract. For example, PT IBU enters into an

agreement with modern retailers to produce rice

with a particular brand (a private brand). In the

agreement, PT IBU must produce rice at Quality

II, but the fact shows the rice quality produced in

the packaging is at Quality IV and Quality V.

d. PT IBU commits a public deception by listing

rice variety on labels that are inconsistent with

the content. In one of the brands, it says Rojolele

variety, Pandan Wangi (tender, fragrant and only

produced in certain area). However, the fact

shows the rice belongs to the ordinary variety.

e. The label provides misleading information to

consumers. For example: the inclusion of NAR

(Nutrition Adequacy Ratio) is not in accordance

with the provisions of the Regulation of the Head

of National Agency of Drug and Food Control

Number 9 of 2016 concerning Table Reference.

Inclusion of NAR is only for processed food

(ready for consumption food). Meanwhile, rice is

fresh food (must be processed before consuming)

as regulated in the Regulation of Minister of

Health Number 75 of 2013 concerning Nutrition

Adequacy Ratio, so inclusion of NAR table is

not allowed.

f. PT IBU produces Maknyuss and Cap Ayam Jago

Merah brands. The label says they are produced

by PT Sakti, Sragen. However, the fact shows

that they are produced by PT IBU in Bekasi;

g. The inclusion of nutrition values at 2,200 kcal is

not appropriate because, according to the

Regulation of the Head of National Agency of

Drug and Food Control Number 9 of 2016, the

nutrition values should be 2,150 kcal.

The investigators’ actions during the

investigation process against PT IBU were only

done on the rice produced and traded that are not in

accordance with the provisions of the legislation.

The investigators did not ask PT IBU to stop the

process of rice production. The confiscation is

addressed to the packed rice which is not in

accordance with the provisions of the legislation; the

investigators did not confiscate the machines/tools

used in the production process.

4 CONCLUSION

National rice production with improper management

provides opportunities for profit hunters to gain as

high profit as possible. Consequently, a number of

companies try to take advantage of such weaknesses

through rice processing business to gain higher

profits. Therefore, the Government and the people

are two parties disadvantaged by such business

model.The government arranges the production

using a large state cost, but the products are

managed by “bad” private companies to gain huge

profits; and the people should pay a higher price

determined by such private companies.

Law enforcement against PT IBU by the

Indonesian National Police is the ultimate option

(ultimumremedium) after finding some unlawful acts

in the criminal context (wederrechtelijkheid)

committed by the suspect, the President Director of

PT IBU.

Unlawful acts committed by PT IBU have also

been imitated by other medium and largescale

entrepreneurs/private companies. However, with the

legal actions against PT IBU, other

entrepreneurs/private companies stop conducting

such business model and eventually follow the

regulation set forth by the Government of Indonesia,

i.e. Regulation of the Minister of Trade Number

57/M-DAG/PER/8/2017 concerning Determination

of Highest Rice Retail Price and Regulation of the

Minister of Agriculture Number

31/PERMENTAN/PP.130/8/2017 concerning Rice

Quality Class.

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