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Indonesia Eying Sugar Imports to Curb Prices
Dian Ariffahmi & Arti Ekawati | August 23, 2009

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The Trade Ministry says it is considering importing white sugar for household use to help bring soaring prices under control, despite international prices also being on a rapid upward trajectory.

At present, the average retail price of white sugar on the local market is about Rp 9,500 (95 cents) a kilogram, but this is expected to rise further with the Idul Fitri festivities in the offing.

“There are two ways to increase the sugar supply on the market: first, by channeling refined sugar to the consumer market and, second, by importing sugar,” Subagyo, the Trade Ministry’s director general of domestic trade, said on Friday in Bandung, West Java.

White sugar is of a lower grade than refined sugar and is normally for household use, while refined sugar is used by the food and beverage industry.

Subagyo said that the question of whether to import sugar or redirect refined sugar to the consumer market would need to be considered carefully. However, it would ultimately depend on whether domestic sugar producers abided by commitments they had made to the ministry to keep prices of the commodity under control.

“At present, we are trying to encourage [state sugar producers] PT Perkebunan Nusantara and PT Rajawali Nusantara Indonesia to act on their commitments to set a maximum auction price for sugar of Rp 6,500 per kilogram,” Subagyo said.

The price of white sugar has been on the rise since the end of June, and has increased from an average of Rp 6,649 per kilogram in January to about Rp 9,500 a kilogram at present.

The government had earlier said it expected the price to decline to Rp 7,000 during the May-November milling season.

Arum Sabil, chairman of the Indonesian Sugarcane Growers Association (Aptri), said on Sunday that the government needed to focus on the real reasons behind the rise in prices during this year’s milling season, namely, soaring prices on the international market

“The has led to some food and beverage firms to switch from imported sugar to domestic sugar as it is cheaper, which has led to higher demand on the domestic market,” Arum said.

Bad weather in the world’s two biggest producers, Brazil and India, have pushed global sugar prices to three-year highs.

Arum said that importing sugar under current conditions made no sense as the commodity was fetching $560 a ton on the international market.

“Given recent international trends, the price of imported sugar would be Rp 8,000 a kilogram at domestic ports,” Arum said. “In the end, the price in the retail market would be the same as domestically produced sugar. So what’s the benefit of importing it if the price will be the same?”