Instead of tariffs, the heyday of sugar must be resumed

Instead of tariffs, the heyday of sugar must be resumed

F. Rahardi, Agribusiness Working Forum (FKA), Jakarta

Sugarcane planting is indeed no longer lucrative but like
rice, Java's farmers have no alternative.

Planting costs about Rp 4.5 million per hectare for each
season of 11 months. This covers seedlings, land processing and
planting for three harvesting periods -- meaning you can plant
sugarcane once and harvest it three times in 33 months. However
cash-strapped sugarcane growers usually keep the sugarcane plant
stumps for 10 harvest periods. Understandably, the output
continues to dwindle.

Cutting sugarcane stalks and transporting the sugarcane stalks
costs about Rp 3 million per hectare. Each hectare of farm land
will produce about 100 tons of sugarcane; while one hectare of
dry land yields about 60 tons. The milling cost is Rp 1,300,000
per 100 tons of raw material. The present output of sucrane in
Java ranges between 7 percent and 8 percent, half the rate
achieved during the sugar boom under the Dutch.

The cost incurred by a grower becomes Rp 7 million per
hectare. With an average sucrane yield of 7.5 tons per hectare
and the price of sugar at Rp 3,000 per kilogram, the gross
earnings would be Rp 22.5 million.

A grower gets 66 percent of this amount, or Rp 14,850,000,
while the 34 percent goes to the mill, plus the remainder of the
cane. The grower may get another Rp 1,100,000 from selling the
2.5 percent out of 3 percent of the sugar remains.

From the Rp 14,850,000 a farmer must pay Rp 7.5 million for
costs. The remaining Rp 7,750,000 sustains the farmer for 11
months and another month to prepare for the following season.

Land rent in Java ranges from Rp 2 million to Rp 3 million a
year; the remaining earning per hectare per year would be Rp
4,750,000 to Rp 5,750,000 -- and that is on paper.

In reality a farmer may not achieve 100 tons of canes per
hectare a year. If he refrains from felling the plant and keeps
it for another three harvests the yield per hectare per season
will continue to decline from 90 tons, 80 tons way down to 50
tons. Sucrane content would also decline by 7 percent to 5
percent. The potential for losses will increase with floods,
drought or pests (grasshoppers and maggots) and diseases (fungi
and bacteria).

The decline of the cane sugar industry is mainly due to
problems outside the farm because of the great inefficiency in
our agricultural sector. This has occurred since the government
changed the sugarcane planting system from land leasing by the
state-owned plantations (PTPN) to independent sugarcane growing
by farmers.

Output per hectare has continued to drop owing to the
extension of the harvest period without being coupled by removal
of the old plants, the use of old seedling clones and reduced use
of fertilizer due to the impact of the prolonged economic crisis.
Sugar mills have also contributed to this inefficiency.

During the New Order, PTPNs were a cash cow of officials of
the agriculture ministry. If the minister or top official toured
a region, costs of transportation, accommodation, meals and
"souvenirs" would be borne by the provincial administration. Thus
the budget allocated in the ministry for this purpose would be
unused. Then, the administration would ask a PTPN to bear these
non-budgetary expenses. Even today this deplorable practice
continues.

Nowadays PTPNs, like other state-owned firms, are under the
auspices of the Office of the State Minister of State
Enterprises. This means that technically the related ministry no
longer has authority over the PTPNs to extract money from them.

However inefficiency persists; officials of the new
institution dealing with this PTPN still extort money from the
PTPNs anyway. With the Autonomy Law, provincial and regency
administrations treat the PTPNs as their cash cow. Then, the
local PTPN must set aside a special budget for gifts for the
region's military and police chiefs, the chief of staff in
Jakarta etc.

Inefficiency is also brought about by extortion by hoodlums,
land transport officials, traffic policemen and so on along the
transportation line. Inefficiency has worsened further in PTPNs
because of land and crop looting.

In the case of sugarcane, however, looting has not occurred
because under the new system, the PTPN, which manages sugar mills
(particularly in Java), relies on growers to supply its raw
materials. From this point of view, the change in the system is
favorable. But, it would be better for Java's sugar mills and
their trading line to be controlled by cooperatives or groups of
sugarcane growers.

Sugarcane tastes bitter to sugarcane growers in Java because,
among other things, factory personnel are involved in corruption.
A sugar mill must indeed receive payment for its services,
according to market rates. The prevailing output-sharing pattern
places farmers in a weak position. Some people in the sugar mills
manipulate the level of sugar output because farmers cannot prove
that output is 6 percent, or even 8 percent.

Sugar mills sometimes intentionally do not make any schedule
for milling so that sugarcane stems taken to the mill cannot be
immediately milled. Output may then drop to only 6 percent or
even 5 percent. A drop in the sugar output will automatically
increase the output of sucrane content.

This trick results in larger profits for the mills and is a
safe way to engage in corruption. The waste from a sugar mill is
processed further into monosodium glutamate, spirit, alcohol,
sorbitol and other alcohol derivatives. Solid waste in the form
of stem cellulose is still economically valuable although the
sweet liquid has been extracted. At present this waste is used
only as a fuel in the mill or as compost for mushroom
plantations. The entire economic value of the waste belongs to
the mill -- which is also shared with the growers.

Internal problems must be solved to cut dependence on imports.
However gloomy our history of sugar, we still have considerable
strength. Indonesia is the motherland of sugarcane. High-yielding
clones have been developed by our own experts. Our sugarcane
growers, with a long history behind them, are highly skilled in
sugarcane cultivation. For hundreds of years, our sugar dominated
the world market.

Sugarcane absorbs nutrients from the soil efficiently and then
processes it with the help of sunlight and carbon dioxide, so
that one hectare of land will generate 100 tons of raw materials
within a year. With a sugar output rate of 10 percent, you get 10
tons of sugar crystals.

In the sugar heyday, sugarcane growers in Java could generate
over 100 tons per hectare with a sugar output of up to 15
percent. This achievement must be achieved again, not by making
an issue of flourishing sugar imports or by protecting sugarcane
growers with import duties.

If sugarcane growers and PTPNs are efficient, they will not
only meet the domestic demand but will certainly be able to
resume the export of sugar.