Refined Sugar for Consumption Disadvantages Farmers

The government is considered to have violated a regulation regarding the prohibited sale of refined sugar for public consumption. The sales would further suppress the price of sugar produced by domestic farmers.

KOMPAS/TOTOK WIJAYANTO

Several trucks unload a shipment of raw sugar from the Philippines on Tuesday (18/2/2020) at Tanjung Priok Port in North Jakarta.

JAKARTA, KOMPAS -- As many as 99,000 tons of refined sugar, which was supposed to be for the industry, was reallocated for public consumption and was due to be distributed to modern retail and traditional markets starting Wednesday (29/4/2020). This step is expected to immediately cut the price of sugar, which has jumped to more than Rp 18,000 per kilogram in the market.

However, the government is considered to have violated the regulation regarding the sale of refined sugar. According to Trade Minister Regulation No. 1/2019 concerning the Sales of Refined Crystal Sugar, refined sugar is prohibited from being sold for public consumption. The producers of refined sugar are also not allowed to sell their product to distributors, retailers or consumers, but directly to the industry.

According to the Trade Ministry director general of domestic trade Suhanto on Tuesday (28/4/2020), the decision (to allocate refined sugar for public consumption) was made to deal with the shortage in sugar supply in the market and to stabilize the sugar price. Currently, the producers of refined sugar have produced 99,000 tons from the target of 250,000 tons.

There\'s no way farmers can continue to survive under these conditions.

However, that volume is considered insufficient to fill the gap and stabilize prices. The refined sugar will be sold for Rp 12,500 per kilogram (kg) at the consumer level.

Khudori, a member of the Food Security Council working group, believes the government\'s decision will increasingly put pressure on sugar farmers. The sugar produced by domestic farmers could potentially not be absorbed by the market.

In the next one to two months, the imported sugar that has not come in will pile up and create an abundant supply. Beside, there is also 250,000 tons of refined sugar that has been allocated for public consumption. Meanwhile, next month we will have entered the sugar milling season. Such abundant supply has the potential to disadvantage farmers.

"The government continues to ask farmers to be patient and subsidize consumers. There\'s no way farmers can continue to survive under these conditions," he said.

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Kompas/Bahana Patria Gupta

Customers queue to pay for their groceries on Tuesday (21/4/2020) at the Lumbung Pangan Jatim food bazaar at JX International in Surabaya, East Java. The food bazaar sold staple foods like rice, sugar, cooking oil, eggs, fish, meat and garlic at below market prices.

The cost of processing raw sugar into a final product is relatively cheap, which is Rp 8,000 per kg. The government has set the highest retail price at Rp 12,500 per kg. We see the disparity [between the government’s price and the cost of production] is high. "Now, the question is: Which side has benefited from [the government’s] policy?" said Khudori.

According to the secretary-general of the Indonesian Sugarcane Farmers Association (APTRI), M Nur Khabsyin, the government\'s move made competition unequal. The production of refined sugar by the industry by using imported raw materials is 30 percent more efficient than the production of sugar from farmers\' sugarcane.

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According to chairman of the Indonesian Refined Sugar Association (AGRI) Bernardi Dharmawan, there were nine association members that were assigned by the government. The sugar producers are ready to support the reallocation of refined sugar for public consumption. However, AGRI still prioritizes fulfilling the demand of the food and beverage industry.

According to Suhanto, the government had to keep the supply amid the shortage while awaiting the sugar milling season in June. "The sugar from domestic farmers can only be ready by early July. This shortage must be filled with supply, one of which is by assigning SOEs to import white crystal sugar and asking the producers of refined sugar to produce consumption sugar," he said.

Supervision

Khudori understands the unique situation and that the stock of farmers\' sugar may not be able to meet people’s needs of 250,000 tons of sugar per month. However, there needs to be strict supervision of this refined sugar reallocation policy so that it does not end in favor of certain companies.

Khudori estimated the cost of processing refined sugar from raw sugar into a final product was Rp 8,000 per kilogram. If we look at the highest retail price of Rp 12,500 per kilogram, the price disparity is indeed already high. "Finally there is the question: Who really benefits from this policy?" he said.

The policy to sell refined sugar to the retail market for public consumption, he said, was a violation of a regulation. The government was asked to be transparent about the identity of the companies/producers that had been given the task (to sell refined sugar for public consumption) and supervise the reallocation and distribution of refined sugar to the retail market.

"To avoid a moral hazard, we must monitor it properly. Do not let producers get excessive profits from the situation," he said.

According to the chairman of the Indonesian Refined Sugar Association (AGRI) Bernardi Dharmawan, nine association members were assigned by the government for the sugar reallocation. They are Angels Products, Sentra Usatama Jaya, Permata Dunia Sukses Usaha, Berkah Manis Makmur, Andalan Furnindo, Medan Sugar Industry, Makassar Tene, Sugar Labinta and Dharmapala Usaha Sukses.

According to him, producers are ready to increase the production of refined sugar for the reallocation policy. However, in principle, AGRI producers will continue to prioritize commitments to meet the needs of the food and beverage industry and to optimize their idle capacity to produce sugar for public consumption. "The government has asked us to increase production and we will try to realize that," said Bernardi.