At Least Rp 3t Required for Indonesia Sugar Industry, Officials Say

The Jakarta Globe, Arti Ekawati

Workers carrying freshly-harvested sugarcane in South Sulawesi. The government is aiming for Indonesia to become self sufficient in sugar by 2014 and to more than double sugar production by 2025. (Antara Photo)

Indonesia needs an additional Rp 3.1 trillion ($328.6 million) in investment to build 50 new sugar plants required to reach the goal of self-sufficiency in white and refined sugar by 2014.

The funds are needed to build 10 sugar plants with a milling capacity of 15,000 tons of cane per day, 15 plants with a capacity of 10,000 tons per day and 25 plants with a capacity of 6,000 tons per day, according to Achmad Mangga Barani, the director general of plantations at the Ministry of Agriculture.

The country currently has only 61 sugar factories, including 51 factories belonging to state-owned companies. Most are severely outdated.

Achmad said the domestic sugar industry required large-scale investment to maintain and develop sugarcane plantations and processing plants.

“We are working with BRI [PT Bank Rakyat Indonesia] to help create a consortium to fund sugar-plant projects,” Achmad said in an interview with the Jakarta Globe on Thursday.

Adig Suwandi, the secretary of state-owned company PT Perkebunan Nusantara XI, said the high price of sugar has provided an incentive to build factories and plant sugarcane.

Prices have more than doubled this year, and were trading at record highs last week, with white sugar selling at $687 a ton.

“The recent price is still favorable,” Adig said.

However, he cautioned that sugarcane output was often affected by climate conditions.

“We must use the right technology to reduce the impact of climate on sugarcane production,” he said.

He pointed to the extended heavy rains during the early milling season this year, which delayed transportation of cane from plantations to processing factories and reduced sugar content.

The government has set a goal of sugar self-sufficiency by 2014, with targeted output of 5.7 million tons, including 2.96 million tons of sugar for direct consumption and 2.74 million tons for the food and beverage industry.

In addition to generating investment, the government plans to implement new sugar quality standards next year. With the new standards, sugar will no longer being classified into two major categories — white sugar for direct consumption and refined sugar for processing by the food and beverages industry.

Under the new rules, sugar will be classified according to its color and based on its Icumsa rating. The lower the Icumsa rating, the brighter the color and better the quality.

“I hope sugar companies will be ready for the implementation of the new standards in 2010, that they will be ready to produce sugar that is up to the standards, whether for the food and beverage industry or direct consumption,” Achmad said.

Sugar for industrial purposes with lower Icumsa ratings will be sold at higher prices compared to sugar for daily consumption.

Factories not able to meet the higher standards will likely be required to produce raw sugar for further processing by factories.

“We will cooperate with the Industry Ministry and the State Ministry for State-Owned Enterprises to evaluate the companies, which ones will only produce raw sugar and which will produce the cane into sugar,” Achmad said.