The government has cut the import duties on raw sugar by 73 percent and refined sugar by 49 percent, effective next month, to bolster domestic stocks and stabilize prices, the trade minister said on Thursday.
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. “The cuts were made by the [ministry’s] tariffs department,” Trade Minister Mari Elka Pangestu said.
The government has stepped up efforts to expand domestic sugar stocks and push down the price of raw sugar, which has risen in line with international prices.
Retail sugar prices are currently hovering around Rp 10,500 ($1.08) per kg, up sharply from Rp 6,000 earlier this year.
The new duties will apply to all sugar shipments arriving between October and December, according to a letter the Coordinating Ministry for the Economy sent to the Trade Ministry two weeks ago.
Yamin Rachman, executive director of the Indonesian Sugar Refiners Association (AGRI), voiced support for the government’s decision, saying it should help ease pressures on retail sugar prices.
“Although international prices affect domestic prices, the import duty cuts should help because they might encourage importers to bring in more sugar,” Yamin said.
The government, however, needed to ensure that domestic sugar producers are protected, he said.
The country initially planned to allow an additional 1.68 million tons of raw sugar and 300,000 tons of refined sugar to be imported this year. However, Mari recently confirmed that the government would increase its total import quota to 1.86 million tons.
Yamin blamed rising domestic sugar prices on a lack of local supplies and illegal stockpiling by some sugar producers.
The government waited too long to intervene by importing additional supplies, he said.
“Demand [for raw sugar] actually increased at a faster rate than supply,” Yamin said. “People knew the government would not increase its import quotas.”
The country now needs an additional 500,000 tons of refined sugar, which is roughly enough to supply the domestic market for two months.
Analysts have said that higher international prices have encouraged the country’s food and beverage producers to buy up sugar that was initially set to be sold on the domestic retail market.
The sugar industry is regulated by the government. Most consumers purchase sugar made from cane grown by local farmers, but industrial users import refined sugar directly, or buy supplies from domestic processors, who import raw sugar.
Arum Sabil, chairman of the Indonesian Sugarcane Farmers Association, denied that sugar farmers were not producing enough sugar.
“The increase in prices is normal — it follows the international price,” Arum said. “Cutting import duties will only hurt domestic producers.”
Sugar has gained 81 percent in London this year to about $578 a ton on Tuesday, Bloomberg said.
Source: The JakartaGlobe (17/09/2009)