Farmers Worried About the Impact of Imported Sugar

KOMPASTotok Wijayanto

Two workers unload refined sugar from India using the Margaret SW Ship at Tanjung Priok Port, Jakarta, Tuesday (6/4/2021). The government has issued import permits for around 680,000 tons of raw sugar and consumption sugar since the end of last year.

JAKARTA, KOMPAS - Sugarcane farmers are worried that Industry Ministerial Regulation No. 3/2021 concerning the guarantee of the availability of raw materials for the sugar industry in fulfilling sugar demand will result in a further increase in imports of raw sugar. If it happens it will threaten the sugarcane farmer\'s business because the price of sugar has continued to decline due to an oversupply in the market.

"Imports have the potential to push down local sugar prices. In recent years, the sugar price has been very weak. Sugar imports are continuing so that local sugar prices are under pressure," M. Nasir, a sugarcane farmer in Pagak, Malang, East Java, said on Thursday (8/4/2021).

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An executive of the Malang Farmers and Fishermen Group, Ali Masjudi, said many sugar factories had delayed the payment to sugarcane farmers for several months last year because traders had difficulty selling the sugar in the market due to an oversupply. Based on Kompas data, at the end of January 2021, about 64,000 tons of farmers\' sugar could not be absorbed by local sugar factories, PG Kebon Agung and PG Krebet Baru. Usually, the farmers’ sugar is sold out before the end of the milling season at the end of November. In addition, there are 160,000-180,000 tons of sugar that have been sold, but have not been taken by buyers because of the low market absorption.

Imports have the potential to push down local sugar prices.

Farmers are worried that the regulation regarding the guarantee of the availability of raw materials for the sugar industry will further increase the imported raw sugar as they could be used to supply sugarcane-based factories which are still unable to operate at full capacity due to lack of raw materials.

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Therefore, farmers asked the government to guarantee that imports are not carried out during the harvest season. The government is also asked to closely control the sugar market so that the imported raw sugar does not result in a fall in the prices of the farmers’ sugar.

KOMPAS/BAHANA PATRIA GUPTA

A worker carries freshly harvested sugar cane to a truck in Waru District, Sidoarjo, East Java, Saturday (11/7/2020).

Domestic raw materials

Although local sugarcane factories are allowed to import raw sugar as stipulated in the new regulation, they have been advised to prioritize domestic raw materials for the production of sugar for consumption.

This provision is regulated in Industry Ministerial Regulation No. 3/2021. According to the ministry’s Agro Industry director general, Abdul Rochim, with this regulation, the government is asking sugar producers to prioritize raw materials from domestic sources. "Through this regulation, we want to restructure the focus of sugar production and emphasize the demarcation between GKP sugar (white crystal sugar for consumption and GKR sugar (refined crystal sugar for industrial use). Sugarcane-based sugar factories should be focused on the production of GKP sugar for consumption,” he said when contacted on Thursday (8/4).

Through this regulation, we want to restructure the focus of sugar production and emphasize the demarcation between GKP sugar (white crystal sugar for consumption and GKR sugar (refined crystal sugar for industrial use).

Last year, GKR industrial sugar factories were allowed to use imported raw sugar for the production of GKP consumption sugar to cope with the increase in the prices of consumption sugar. According to Abdul Rochim, such a policy should be avoided. Import permits can be issued only if the industry has received an assignment in accordance with the results of a limited coordination meeting held by the Office of the Coordinating Economic Minister.

Abdul said Industry Ministerial Regulation No. 10/2017 on facilities for obtaining raw materials for the development of the sugar industry remained valid. Sugarcane-based sugar factories located outside Java are still allowed to import for seven years, while those located on Java may import for five years. During this period, the import volume will be gradually reduced.

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According to Abdul, the issuance of import permits for those factories is based on an audit of the expansion of sugarcane plantation areas and partnerships with sugarcane farmers so that the import is in line with the government’s import substitution policy in the sugar industry. The executive director of the Indonesian Sugar Association, Budi Hidayat, said the government needed to disseminate the information about the import policy to all stakeholders in the sugar industry. The appointment of sugar factories that can import must also be transparent.

Budi underlined the importance of the demarcation in the regulation. Thus, GKR factories should not be allowed to produce GKP sugar. The government must also ensure that GKR production is not sold in the GKP market. (JUD/AGE/IKI/WER/NIK/ETA)

This article was translated by Hendarsyah Tarmizi.