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)