Bulog launches sugar market intervention

Bulog launches sugar market intervention

JAKARTA (JP): The National Logistics Agency (Bulog) and the
Association of Sugar and Wheat Distributors, in an effort to curb
increases in the retail prices of white sugar, started releasing
tons of the commodity into market places yesterday.

Soeyoto, an Apegti executive, was quoted by Antara as saying
that the association allocated yesterday about 10 tons of
imported sugar for the market operation.

The intervention will continue on a daily basis in Jakarta, he
said, without disclosing how long the operation was expected to
last.

Bulog chairman Beddu Amang said earlier this week that, in
order to control the rise of sugar retail prices, such market
intervention would have to be nationwide.

In spite of guarantees by Beddu and other government officials
that the government's decision to raise the producer price of
sugar from Rp 79,200 per quintal (100 kg) to Rp 91,080 (about
US$41) per quintal on April 1 would not affect retail prices,
market places reacted almost immediately.

Press reports from various markets throughout the country
indicate that the retail prices of sugar have risen to between Rp
1,500 and Rp 2,000 per kilogram from about Rp 1,300 last month.

Various officials had argued that because the four percent
excise on sugar had been scrapped and various Bulog management
costs had been reduced, the retail prices of sugar would remain
static despite the rise in the producer price.

The officials were adamant in that view despite a projected
fall in sugar production this year to about 2.3 million tons, as
compared with 2.4 million tons in 1994 and 2.48 million tons in
1993. The expected shortfall is due to a protracted drought in
sugar-producing areas.

According to government figures, national consumption of sugar
this year will reach about 2.95 million tons, while Bulog's
existing stocks are about 975,000 tons.

Beddu Amang and M. Badrun, the chairman of the National Sugar
Council, conceded that the government was likely to import about
250,000 tons of sugar for "precautionary reasons."

Bulog has a monopoly on the importation and distribution of
sugar, which causes domestic retail prices of the commodity to be
higher than international price levels.

Various observers, including the World Bank, have criticized
this policy which, they claim, has made the Indonesian sugar
industry inefficient. (hdj)