GOVT TO BOOST SUGAR PRODUCTION

By Andi Abdussalam

Jakarta, Nov 7 (ANTARA) - The Indonesian government is planning to revitalize sugar mills in the country in an effort to increase sugar production and meet domestic needs which continue to increase.

        With a population of about 230 million Indonesia is a big sugar consumer needing about 3.8 million tons per annum. It needs some 2.7 million tons of sugar for direct consumption and 1.2 million tons of refined sugar for industries (1 million for large industries and 200,000 tons for small ones).

        However, its own annual sugar output from about 60 factories only ranges between 2.7 million and 3 million tons, requiring it to import the balance. The problem is that when stocks fall short, prices increase and consumers will cry, but when the government imports the commodity, sugar sugar cane farmers will be impacted.

        Indonesia's sugar output in 2009 is likely to fall short of the targeted 3 million tons. "What we predicted at the start of this year has drawn attention as sugar output is likely to fall 200,000-300,000 tons short of the target of 3,000,000 tons," assistant for agricultural and fisheries affairs to the chief economic minister Bayu Krisnamurthi said recently.

        He said the national sugar production in 2009 is likely to range from 2.73 million tons to 2.75 million tons. "The figures are not yet definite. The exact ones will be available next week," he said.

        After all, the government will make every effort to ensure that year-end sugar stocks will reach one million tons to meet consumption for four to five months in 2010, he said.

        Shortage of stocks easily generate price increases, let alone if the nation is facing fasting month. In the face of this year?s fasting month last August for example, prices of sugar sky-rocketed in various pars of the country. Sugar prices in various parts of the country increased from Rp7,000 per kg to a range between Rp8,000 per kg and Rp11,000 per kg.

        The dynamics of stocks volumes and prices of sugar is also influenced by the world sugar price condition. According to Finance Minister Sri Mulyani Indrawati, the dynamics of sugar in the international market developed fast while sugar factories at home still used non-competitive technologies and were still inefficient.

        "This conditions require us to formulate a balanced policy, including import policy and its import duty," she said.

        Bayu Krisnamurthi said to solve the sugar stock shortage problem the government was trying to raise the stocks by increasing imports.

        Meanwhile, Trade Minister Mari Elka Pangestu said her ministry will evaluate state-owned plantation company PTPN's performance in importing raw sugar.

        "But there will be no sanction if the import does not materialize," she said.

        The government decided last month to cut duties on imported raw sugar by 73 percent and refined sugar by 49 percent effective this month to bolster domestic stocks and stabilize prices.

        Under the decision, the import duty on raw sugar will be cut to Rp 150 per kilogram, down from Rp 550 per kg, while the duty on refined sugar will drop to Rp 400 per kg from Rp 790 per kg.

        In an effort to overcome the problem of sugar shortage at home, President Susilo Bamgang Yudhoyono has included the sugar problem as one of his 45 priority programs in his first 100-day work target of his second-term government which began after he was installed last month (on October 20, 2009).

        According to State-owned Enterprises Minister Mustafa Abubakar, the government is to earmark Rp 1 trillion in funds as initial support for the revitalization of sugar mills under a subsidized interest scheme.

        "The subsidized interest scheme will allow sugar mill companies to obtain commercial credits from banks," Abubakar said on Friday after a meeting with Industry Minister MS Hidayat.

        Mustafa said he and Hidayat had also discussed revitalization of other sectors, namely fertilizer and salt industries, and as a result, his ministry would come up with a concept for the revitalization of all three sectors within two weeks' time.

        "But we will pay relatively greater attention to the sugar and fertilizer sectors," he added.

        The minister said there were seven sugar factories under the coordination of the State Enterprises Ministry that needed to be revitalized by renewing their supporting equipment or rebuilding their factories.

        "The program aims to increase their outputs in quantitative and qualitative terms. The concept will be ready in two weeks' time," Mustafa said.

        In the meantime, Industry Minister MS Hidayat has unveiled a plan to revitalize fertilizer plants and sugar mills as part of his program in the first 100 days in office.

        "For sugar mills, I have coordinated with the finance minister to revitalize aging machines by replacing them with new ones," he said after a cabinet session at the presidential office.

        He said the government had set aside Rp1 trillion in funds to revitalize sugar mills' machinery. By revitalizing their machinery, the sugar mills would be able to increase their production capacity in support of the country's food resilience, he said. ***2*** (T.A014/A/HAJM/13:00/f001) (T.A014/A/A014/F001) 07-11-2009 13:06:24