Producer price of sugar to rise

Producer price of sugar to rise

JAKARTA (JP): The government is likely to raise the producer
price of sugar in the near future, State Minister of Food Ibrahim
Hasan said yesterday.

"I expect the government will soon increase the producer price
of the commodity because we haven't raised it since 1992," said
Ibrahim, concurrently chairman of the National Logistic Agency,
which has the monopoly right to trade the commodity.

The Minister, however, declined to specify when the price
increase would go into effect.

Official figures state that the producer price of sugar is set
at Rp 792 (about 36 U.S. cents) per kilogram, while retail prices
range between Rp 1,300 and Rp 1,400.

Government policies, set to create self-sufficiency in sugar,
virtually insulate Indonesian sugar prices from the world. Such
protection has, as a result, caused local prices to exceed
standard prices on the world market.

Ibrahim's statement yesterday came not long after the domestic
sugar trade was criticized by various observers.

Analysts, including the World Bank, have noted that sugar
trade regulations allow the government to set the farmgate price
to sugarcane growers, the mill buying price and the ex-factory
price.

In addition to price controls, the intensification program for
smallholders gives farmers subsidized inputs but forces them to
cultivate cane periodically in order to ensure supply to state-
owned sugar mills, the World Bank said in its 1994 country
report.

Dono Iskandar Djojosubroto, head of the Financial and Monetary
Research Center of the Ministry of Finance, also said last month
that sugar trade policies have caused inefficiencies, such as
exorbitantly high distribution costs, in the sugar industry.

Mohammad Amin, Bulog's operational deputy chairman, however,
stated that the agency will not substantially change sugar trade
regulations. (hdj)