Industry may lose Rp 60b over sugar curb

Mustaqim Adamrah, The Jakarta Post, Jakarta

The food and beverage industry stands to lose at least Rp 60 billion (US$6.44 million) as a result of the Indonesian Sugar Council's requirement that refined sugar imports be reduced.

The losses were expected in the wake of a new policy requiring a cut in this year's import quota from 700,000 tons to 500,000 tons, chairman of the Sugar Consumer Industry Forum Franky Sibarani said Monday.

Franky said the industry would have to purchase some 200,000 tons of the refined sugar from the local producers, which sold the sweetener at a more expensive price.

"The industry has to spend between Rp 200 and Rp 500 in additional costs for every kilogram of local refined sugar compared to those of imports."

"We have estimated a loss of between Rp 60 billion and Rp 100 billion due to the policy," Franky said.

Though 80 refined sugar importers hold licenses, only 51 are actually importing sugar, he added.

The council also slashed imports of raw materials used in refined sugar production to 1.25 million, from 1.55 million.

Industry Minister Fahmi Idris said the regulation was just a temporary measure and would be subject to review after three months.

The regulation has been issued due to the flood of cheaper refined sugar imports, which could hurt local producers.

An oversupply of refined sugar -- which is only supposed to be used by industry, but which has been distributed to retailers -- has caused a decline in the price of local white sugar, with cane farmers suffering.

Aside from the limitation on imports, the food and beverage industry is also required to annul sugar import contracts, forcing it to pay penalties for planned sugar imports of between $5 and $8 per ton.

A typical contract may consist of between 300 tons and 2,000 tons of sugar per delivery, Franky said.

"If the government insists on its regulation, the industry will halt particular production lines because of specification differences between local and imported sugar, lowering product quality or increasing the selling price," he said.