Subsidy for sugar industry revitalization program cut

The government has chopped a proposed 2009 subsidy budget for the revitalization of sugar mills in the country to Rp 50 billion (US$5.35 million) from Rp 160 billion.

The budget proposal is still awaiting approval from the House of Representatives.

Ansari Bukhari, the Industry Ministry's director general for metal, machinery, textiles and miscellaneous industries, said industry players had proposed the cut.

"We have met with sugar business people. They said it was too risky for industry players to invest in 'huge' amounts as sugar prices are currently quite low, below Rp 5,000 per kilogram," Ansari said.

"Therefore, they will invest between Rp 400 billion and Rp 500 billion in the sugar mill revitalization program next year, with the government providing a subsidy amounting to 10 percent of their total investment -- which is up to Rp 50 billion."

The subsidy is expected to be made available by taking funds from the proposed 2009 education budget, with the government to divert Rp 128 billion to fund the sugar mill revitalization program, he said.

"Of the 128 billion, Rp 50 billion will be disbursed as subsidy to sugar producers who want to purchase new locally made machinery, while the remaining Rp 78 billion will be used to develop the small and medium industry."

"But the subsidy will not be available for sugar producers importing new machinery."

The project, aimed at reaching national sugar self-sufficiency by 2009, will increase productivity and efficiency at 52 sugarcane factories, most of which are located on Java, Sumatra and Sulawesi, by upgrading their machineries.

The Agriculture Ministry's director general for plantations Ahmad Manggabarani has said the program will boost the country's sugar production to 2.7 million tons this year and secure national self-reliance next year.

Last year, the country produced 2.44 million tons of sugar, short of domestic demand, which stood at 3 million tons.

The government also aims to increase sugarcane plantation areas, mostly by providing capital to state plantation firm PTPN so that it can acquire and manage more land.

The country's total sugarcane plantation area grew 4.15 percent to 427,000 hectares this year from 410,000 hectares in 2007, and is expected to reach 450,000 hectares by next year, Ahmad said.

source:The Jakarta Post