Minister issues new import ruling, sugar prices to rise

Adianto P. Simamora, The Jakarta Post, Jakarta

The Ministry of Trade and Industry has issued a new decree regulating sugar imports, which only authorizes government importers to import sugar in a bid to increase the current low price of the commodity in domestic markets.

According to Minister of Trade and Industry Rini M Soewandi, Decree No. 643/2002 stipulates only state-owned plantation companies (PTPNs) would be allowed to import white sugar.

The importation of raw sugar and refined sugar, according to the decree, can only be done by manufacturing companies which use sugar as a raw material in their production process.

The decree also stipulates that PTPNs can only import white sugar if the price had increased to Rp 3,100 per kilogram (kg) at the sugarcane farmers' level.

"We hope the policy can help increase the farmer's selling price. All sugar imports will be stopped if the price falls below the minimum level (Rp 3,100)," Rini told reporters.

The decree will be valid for two years from Oct. 7.

Rini issued the decree amid pressure from local sugarcane farmers demanding higher import tariffs to protect them from more affordable imported sugar.

A source said that thousands of sugarcane farmers were expected to stage a massive rally on Tuesday to ask the government to protect them from better priced imported products which has made sugar prices drop and become more affordable for local consumers.

Sugarcane farmers have intensified pressure on the government to boost import tariffs to as high as 110 percent.

The Ministry of Finance has increased the import duty on raw sugar and white sugar to Rp 550 per kg and Rp 700 per kg, respectively, while the import duty on double-refined sugar was raised to Rp 700 per kg in July.

The tariffs for raw and white sugar were previously set at 20 percent and 25 percent, which, in rupiah terms, was equal to Rp 405 per kg for raw sugar and Rp 534 per kg for white sugar.

Rini said that the issuance of the decree was aimed at helping local farmers to compete and to receive more profit from their business because the imported sugar was much more competitively priced.

Under the decree, all importers must report to the ministry the total amount and the time schedule of their imported sugar every month.

The country's total sugar production is currently at 1.7 million tons with an annual consumption of about 3.3 million tons.

Indonesia is among of the world's top sugar importers, importing around 2.1 million tons of sugar in 1999, 1.2 million tons in 2000 and about 1.6 million last year.

The country also has the lowest import duty on the commodity. The European countries impose a 240 percent import duty on the commodity, and the United States 150 percent. Neighboring countries, Thailand and the Philippines, impose an import duty of 95 percent to 100 percent.

Rini added that the government would assist farmers so that they could compete with foreign sugar exporters by helping them become more productive and efficient in their operations over the next few years.

"During the next two years, the government will restructure the local sugar industry and help boost local farmer's productivity by introducing premier sugarcane seeds to local farmers," she said.

Sugarcane plantations currently cover some 350,000 hectares of land in Indonesia, of which 60 percent is in Java.

Productivity in most Javanese sugarcane plantations averaged only about four tons to five tons per hectare, compared with eight tons in Sumatra.

The country's sugar industry is dominated by state-owned firms that mostly use antiquated machinery and methods.