State plantations to spend Rp 9t in 2010, mostly on factories

The Jakarta Post, Jakarta | Mon, 01/18/2010 11:20 AM

State plantation firms are to spend big this year, mostly to build and revitalize sugar factories as well as constructing fertilizer plants to improve supply to the sugar plantations, a 2010 business plan shows.

The State SOE Ministry has published its 2010 outlook for state companies, revealing that 15 state plantation firms, comprising 14 PT Perkebunan Nusantara (PTPN) and PT Rajawali Nusantara Indonesia (RNI), are targeted to spend Rp 9.06 trillion (US$987 million) on capital expenditure, 50.9 percent higher than last year’s Rp 6.01 trillion.

The expenditure boom is predicted to help to boost the net profits of state plantations by 22.89 percent, to Rp 2.22 trillion from Rp 1.8 trillion last year.

The secretary to the State SOE Minister Said Didu said last week that this year’s capital spending would be used to strengthen downstream industry as well as to develop fertilizer factories and to expand plantation areas.

“For downstream industry, capital expenditure will be used to revitalize sugar factories. At the same time, we will also build fertilizer plants near PTPN’s plantation areas, jointly with state owned fertilizer producers,” Said said over the weekend.

He explained that fertilizer plants were needed to cut supply time and eliminate dependency on

more distant (or overseas) fertilizer suppliers, which disrupted production.

“Our plantations sometimes get late fertilizer supplies due to long procurement processes or late delivery from suppliers. As a result, the fertilizing schedules set by PTPNs are ruined, and this can affect the production,” Said said.

By having their own fertilizer factories, PTPNs would be able to cut out such obstacles, he said.

The factories in question will be jointly developed with state owned fertilizer producers, such as PT Pupuk Sriwidjaja (Pusri), PT Pupuk Kalimantan Timur (PKT), and PT Petrokimia Gresik.

A number of fertilizer factory development plans have been discussed but only one has already been officially signed.

“PKT has agreed with PTPN IV and PTPN V to build a fertilizer factory in North Sumatra,” Said said, without going into details.

Bontang-based PKT will supply raw materials for the fertilizer factory and the fertilizers will be distributed to palm plantations run by PTPN IV in North-Sumatra and PTPN V in Riau.

Said said this plan had triggered protests from some fertilizer suppliers which would lose some of their markets. “We will go on with our plan because it’s important to maintain fertilizing schedules in order to improve production,” he said.

For sugar plantations, the government has planned to build three new sugar factories this year worth a total of Rp 4.5 trillion. Those factories are planned for three East-Java based sugar producers, PTPN X, PTPN XI, and PTPN XII, intended to begin operations by 2011.

PTPN X will use up to Rp 2 trillion in capital expenditure to revitalize its sugar factories and mills, and to expand the area of its sugarcane plantations.

The plan aims to increase the company’s sugar factory production capacities from 37,000 tons to 40,000 tons a year.

PTPN XI and PTPN XII, meanwhile, have formed a consortium with PT Mitra Tani Sejahtera and the Indonesian Sugarcane Farmers Association (APTRI), to build a new sugar factory in Banyuwangi, East Java.

The factory is targeted to process up to 8,000 tons of sugarcane and to eventually produce up to 80,000 tons of sugar per year.

The government has ordered state sugar producers to boost production to meet the estimated national shortfall of 500,000 tons of sugar needed by April 2010.

State SOE Minister Mustafa Abubakar previously said the government would prioritize local sugar to help meet national demand for 1.2 million tons of sugar until the beginning of the new harvesting and crushing season expected to run from April to October.

Every year the country imports about 1.6 million tons of sugar to help meet national demand.

The country’s annual national production of sugar is about 4 million tons, with state-owned plantations producing about 3 million tons.

Indonesia currently has about 61 sugar mills, of which 68 percent were built during the Dutch colonial era. Most are in poor condition and often fail to produce good sugar on schedule. (bbs)