Sugar output to increase this year
P.C. Naommy, The Jakarta Post, Jakarta
The chairman of the Indonesian Sugarcane Growers Association (APTRI), Arum Sabil, predicted on Tuesday a 12 percent increase in domestic production of sugar this year to 1.85 million tons from last year's 1.65 million tons.
According to Arum, improved market prices for farmers in 2003 would encourage farmers to increase production this year.
Arum said that in 2002, farmers faced production costs of Rp 3,200 per kilogram (kg), but could sell the product at only Rp 2,640 to Rp 2,800 per kg on the market.
This caused many farmers to go bankrupt and others to switch from growing sugar cane to other commodities.
He added that this started to shift when Minister of Trade and Industry Rini M.S. Soewandi issued Decree No. 643/MPP/Kep/9/2002 on trade regulations on imported sugar.
"The issuance of the ministerial decree has helped farmers to enjoy a profit, with the market price being higher than their production costs," said Arum. This situation has stimulated farmers to grow more sugar cane.
Arum told The Jakarta Post that after the issuance of the ministerial decree, which limits sugar imports, local sugar prices were maintained at around Rp 3,410 per kg during 2003.
The decree stipulates that only buyers deriving 75 percent of their sugar directly from farmers may import sugar. The Minister of Trade and Industry chose the state plantation companies PTPN IX, PTPN X and PTPN XI, as well as PT Rajawali Nusantara Indonesia, as importers, with state-owned trading firm Perusahaan Perdagangan Indonesia (PPI) maintaining domestic buffer stock, replacing the role of the State Logistics Agency (BULOG).
"With this regulation, it's easier to distinguish legally imported sugar from smuggled sugar," said Arum. This will protect the government from potential import tax losses.
The regulation would also protect farmers from lower market prices caused by smuggled sugar, which is much cheaper than domestic sugar. At the consumer level the decree would maintain the sugar price at a reasonable level.
Arum predicted that domestic consumption would reach 2.5 million tons in 2004.