Government may import sugar

Government may import sugar

By Hidayat Jati

JAKARTA (JP): Retail prices of white sugar are expected to
stay at their current levels, even though Indonesia may have to
import sugar this year because of a drop in output, an official
says.

"Although the government has raised the producer price of
sugar from Rp 70,200 (US$31.90) to Rp 91,080 per quintal, we
expect its retail prices to stay at their current levels of
around Rp 1,300 per kilogram," M. Badrun, chairman of the
National Sugar Council, told The Jakarta Post at his office
yesterday.

"This is because we have scrapped the four percent excise on
the commodity and reduced various costs, such as the management
fees for village cooperatives and the National Logistics Agency
(Bulog)," said Badrun, who is also the Director General of
Estates of the Ministry of Agriculture.

At the end of last month, a spokesman for the Ministry of
Finance announced that the government had decided to increase the
producer price of sugar in order to increase the incentives for
sugarcane farmers.

The spokesman said that the sugar producer price had not been
raised for two years.

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 believe, has made the Indonesian sugar
industry inefficient.

Government figures show that Indonesia currently has 69 sugar
mills, of which 61 are state-owned, with a combined processing
capacity of 2.75 million tons of cane per day.

The World Bank, in its latest annual report on Indonesia, said
that only six of those sugar mills could be considered efficient.

Argument

Contrary the arguments of various analysts, Badrun insisted
yesterday that sugar retail prices would not increase, despite
the forecasted fall in output this year.

Untung Basuki, secretary of the Indonesia Sugar Association,
told Reuters this week that this year's sugar output is projected
to fall to around 2.3 million tons from 2.46 million tons in 1994
and 2.48 million tons in 1993 because of a protracted drought.

Bulog chairman Beddu Amang said last week that his agency
would "do its best" to prevent the retail prices of sugar from
rising. He also said that Bulog would import about 250,000 tons
of sugar this year.

The fiance ministry spokesman said Bulog might intervene in
the market to keep retail prices stable.

Badrun confirmed yesterday the possibility of importing.

"Retail prices will be stable because Bulog, being a
stabilizing agency, will not take any risks and is likely to
import sugar this year," he said.

Badrun told a parliamentary hearing recently that this year's
total supply of sugar was likely to reach 3.35 million tons,
including Bulog's stocks, which should be adequate to meet the
domestic consumption of 2.95 million tons. On that occasion he
said that it would not be necessary to import this year.

Yesterday he stressed that this year's importation would be
for precautionary purposes only.

According to official statistics, Indonesia imported 128,000
tons of sugar in 1993, down from 261,000 tons in 1992.

Skeptical

Meanwhile, a sugar analyst who watches Bulog closely, told the
Post yesterday that he was skeptical about the proposition that
retail prices would stay at their present levels because, he
said, Bulog had a limited capacity to intervene.

"How long can Bulog keep up market intervention before the
retail prices of sugar start climbing up? I know that such
operations are burdensome to Bulog," said the analyst, who
requested anonymity.

He said that the decisions to increase the producer price of
sugar and to scrap its excise still fell short of tackling the
crux of the matter in the sugar industry, namely Bulog's grip on
the commodity.

Badrun dismissed the criticism yesterday, saying that the
government was continually striving towards greater efficiency.

"We want to be efficient and to increase the role of market
forces in development," he said.

Another agricultural economist, who is also a government
official, said the government's decision to raise sugar's farm-
gate price was a "step in the right direction."

"But the end of the journey is still a long way off," said the
economist, who asked not to be named. (hdj)