"The industry is importing wheat flour from Australia because Bulog's prices are much higher," Thomas Darmawan, executive director of the Association of Indonesia's Food and Beverages Producers, said in an interview.

The association groups biscuit, noodle and bread manufacturers.

Darmawan said wheat flour prices offered by Bulog through auctions stood at 2,200 to 2,880 rupiah/kg, while imported flour was quoted at 1,800 rupiah/kg with C&F prices hovering at $240/tonne and the rupiah trading at 7,500 per US dollar.

He said imports were cheaper because the government had scrapped the import duty in wheat flour.

Also, since 1995, food manufacturers were allowed to import wheat flour as long as they secured permission from Bulog, he said.

In addition to foodmanufacturers, private traders also imported wheat flour to be sold to local customers.

Bulog is auctioning its wheat flour stocks after it lost its monopoly on imports of basic commodities as part of a government agreement with the International Monetary Fund.

The agency has a million tonnes of wheat flour in stock which it is auctioning in stages. Bulog has so far managed to keep prices high by offering a reserve price for the stocks offered at each auction. The most recent one was held this month.

It is unclear when the next auction will be held, making it possible for the agency to lower its prices on knowing that some foodmakers have turned to Australia to buy their wheat flour.

Darmawan said traders alone had bought more than 100 tonnes of wheat flour, adding that Australia's George Weston Foods Ltd and Goodman Fielder were among the suppliers.

"The wheat flour is coming in, but the amount is not big," said Darmawan, adding that imports have been made since October.

"The industry can usewheat flour depending on their need, but traders who import the goods do not dare to bring in flour in large quantity because Bulog's stocks still stand at one million tonnes," he added.

"Importers are reluctant to import wheat flour in large quantity...if Bulog decides to reduce the offer prices in its auctions, then nobody will buy their (importer's) wheat flour," said Darmawan, adding that imports have been brought in since October.

Indonesia bought 745,000 tonnes of wheat in a July tender for August, October and November shipments.

A total of 100,000 tonnes of the 200,000 tonnes of stocks owned by Bulog have been sold through auctions in five cities in the country since October.

Darmawan said one private biscuit maker was known to have imported around 100 tonnes of wheat flour since October.

Darmawan said the imported wheat flour was high quality, which was mostly used for making French and Italian food.

In 1995, food manufacturers imported 157,000 tonnes of wheat flour with a total value of$43.5 million. Imports fell in 1997 at 20,227 tonnes with a total value of $4.7 million.

Last year, the figures stood at 15,260 tonnes with a total value of $3.8 million.

From January to March this year, food manufacturers had imported 3,309 tonnes with a total value of $780,000, he said.