JAKARTA - Indonesian state banks will provide loans subsidised by the government to food procurement companies to ensure adequate supplies of rice and other staples, as harvests were disrupted by prolonged dry weather, an official said on Wednesday.

State banks will prepare a total of 28.7 trillion rupiah ($1.84 billion) in credit this year, with 6 trillion rupiah withdrawn already, National Food Agency (NFA) Chief Arief Prasetyo Adi told a parliamentary hearing.

"The purpose is for food companies to become standby buyers, become the offtaker for products from our farmers," he said adding the loans were important as some food companies still needed financial support.

The assigned food companies are Bulog and ID FOOD, which will use the loan to secure a number of staple foods from rice, corn, shallots, chilis, beef, chicken, eggs, sugar, cooking oil, and fish, the NFA said.

The Indonesian government will subsidise the interest cost of the loans, resulting in an interest rate of just 2% if the food companies provide collateral for the loans and 3% without security, the NFA added.

Southeast Asia's biggest economy has been trying to control rising food prices since last year, especially for its main diet of rice, amid low production caused by the El Nino weather phenomenon. REUTERS