The office of the State Minister for State Enterprises says that the government will not be able to control the soaring price of sugar because it only has 200,000 tons of sugar at its disposal for the next two month.
“The greater part of the commodity [available] is in the market now. That is the reason for the extreme price increases,” State Minister for State Enterprises Sofyan Djalil told reporters Tuesday.
He added that his office found it difficult to control the market price because the it lacks authority to intervene the market.
Annual national consumption of sugar is about 4 million tons.
In the domestic market, sugar prices are now far higher than the standard retail price set by the Trade Ministry, which is at Rp 6,500 per kilogram.
Prices have varied between Rp 10,000 and Rp 11,000 (US$1) in several regions in the country, for example in West Sumatra and in Papua, pushing the national average price to Rp 9,500 per kilogram.
These price fluctuation tend to follow global market price trends.
Business has criticized the uneven distribution of sugar as one of the aspects that has helped push the prices up.
“The country is not running out of sugar stocks, but it has distribution problems that have helped push prices higher,” The Indonesian Food and Beverage Association (Gapmmi) head of cooperation and advocate division Adhi Siswaja Lukman had said.
Minister of Trade Mari Elka Pangestu previously asked the government to lower sugar price to a more affordable price.
“We’re trying to lower the prices from producers. It is possible because the mills are state enterprises,” Mari said.
According to Sofyan, state plantation PT Perkebunan Nusantara (PTPN) produces 3 million tons of sugar every year. So far, 2.8 million tons have been purchased by private companies.
“They have bought sugar from PTPN after winning the tenders,” he said.
“We cannot control the price because we have sold [the sugar] to private companies.
“We can only control the rest which is still at PTPN,” Sofyan said.
Sofyan believes that the soaring price of sugar is influenced by the international market, where two of the big sugar exporters –India and Thailand — have fallen short in harvesting sugar cane due to uncertain weather conditions.
Importing sugar under current conditions led to the commodity price reaching $560 a ton on the international market.
Sofyan said that the soaring price of sugar in international markets had caused many food and beverage producers, which usually imported sugar, to switch to the domestic market.
As a consequence, this has hampered local consumers from buying sugar for their daily needs.
According Sofyan, sugar production in the country is still low.
However, the demand is quite high and this forces a higher level of imports.
Last year, the country imported 1.61 million tons of sugar.
Indonesia has 61 mills located in Java, Sumatra and Sulawesi islands with the crushing season running from April until October.
Sugar produced from local farms is used for domestic household consumption and not exports.
Industrial users must import refined sugar or buy it from domestic producers.
It was reported that the government would speed up its plan to attain sugar self-sufficiency in 2014 by improving infrastructure and expanding sugar cane plantations.
Today, the country only has 400,000 hectares of sugar cane plantations.
The government estimated that in 2014 Indonesia would need to produce 4.8 million tons of sugar to fulfill its domestic needs and to be self-sufficient in sugar.
