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Most Indonesian state firms which produce white sugar are reluctant to make use of a higher quota this year to import raw sugar because of cost concerns, an official at the state enterprises ministry said on Monday. The reluctance by state firms to import raw sugar will make it harder for Indonesia to bring down domestic sugar prices which have surged to a record level above 11,000 ($1.14) in line with global prices.
The sharp price rise has hit consumers and could add to inflationary pressure in Southeast Asia's biggest economy. Trade Minister Mari Pengestu has said that the government has allowed state firms to import as much as 180,000 tonnes of raw sugar for delivery by December to increase stocks by year end. The government is also planning to temporarily cut import duties for raw and white sugar, which are at 50 percent and 73 percent respectively, in an effort to boost stocks.
"The only state firm that has clearly stated its interest to import raw sugar is PTPN II. It may buy 60,000 to 80,000 tonnes," said Agus Pakpahan, a deputy minister, referring to North Sumatra-based PT Perkebunan Nusantara II. Pakpahan said that the proposed quota had come too late, as by the time the raw sugar is delivered, the crushing season will be nearly finished and sugar mills would then need to buy oil-based fuel to process the raw sugar, rather than using the waste from the sugar cane.
"We are entering the end of the crushing season so from the energy view point, there is no competitive advantage to process raw sugar," he said. However, PTPN II is willing to import because it can use the waste from palm fruits instead of oil-based fuel, he said. Pakpahan said that normally, news of higher imports would be expected to push down prices, but given the fact that the global market is facing a shortage and prices remain high, it would be difficult to cut domestic prices.

Copyright Reuters, 2009

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