Bulog accused of hoarding sugar to reap profit

The Jakarta Post, Jakarta

The National Economic Recovery Committee (KPEN) on Tuesday accused the State Logistics Agency (Bulog), the main distributor of imported sugar, of hoarding the commodity in a bid to prop up the price to gain profit.

KPEN chairman Sofyan Wanandi said the move had created scarcity in the market, which led to the current hike in sugar prices.

"Bulog is not serious in distributing sugar to the markets. They hold the sugar in their warehouses so as to gain more profit," Sofyan told The Jakarta Post.

He said that Bulog also increased the price of the commodity before selling to its distributor network.

Bulog chairman Widjanarko Puspoyo could not be reached for comment.

Sugar prices have recently increased from the government-set price of Rp 4,000 (45 U.S. cents) per kilogram to around Rp 6,000.

Bulog has a mandate to stabilize the price of sugar at home by distributing imported sugar.

Minister of Industry and Trade Rini M. Soewandi last year issued a decree, which only allows a limited number of companies, mainly state-owned plantation companies, to import sugar in a bid to avoid oversupply in the domestic market and help protect the interests of local sugarcane farmers.

The imported sugar will go to Bulog warehouses.

Rini has also allowed Bulog to import 100,000 tons of sugar this year.

There has also been criticism that Rini's move to limit sugar imports by state plantation firms contributed to the sugar price hike problem.

Elsewhere, Sofyan also urged Rini to revoke her trade regime policy on sugar.

He said that a more effective way to protect the interests of local sugarcane farmers was through imposing an import tariff system: raising the tariff at harvest time and lowering it when supplies at home were low.

He said the tariff system should not lead to excessive price hikes of the commodity.

"Imposing a high import tariff is the right solution if the government wants to seriously help the local sugarcane farmers," Sofyan said.

Sugarcane farmers have long pressured the government to boost import tariffs as high as 110 percent, which is still in line with World Trade Organization (WTO) rulings.

But Rini has argued that high import tariffs would hurt local consumers and manufacturers that used sugar as a raw material in their production processes.

Today, the government imposes import tariffs of Rp 700 per kilogram on white sugar.

Indonesia, the world's second largest importer of sugar, applies the lowest import tariffs on the commodity.