The sugarcane harvest is underway in Simoangin-angin, Wonoayu, Sidoarjo, East Java, Friday (11/8). Sugar production is currently constrained by rising production costs, falling prices for farmers and the burden of the value-added tax on sugar.
JEMBER, KOMPAS – The low selling price of sugar makes it difficult for farmers to gain the profit the need as capital for the next planting season. If this situation continues, it is likely that farmers will not be able to plant sugarcane, which will impact sugar factories.
This point was made by Taufik Arahman, the head of the Olean branch of the Indonesian Sugarcane Farmers Association, on Friday (11/8). “If the price stays low like this, next year’s planting season will be at risk,” Taufik said.
Taufik said the price of sugar at the farmers’ level near the Olean sugar factory (PG) was only Rp 9,150 per kilogram. That price is the bailout agreed by PG Olean and farmers that supply sugarcane for the factory.
The price is below the production cost of Rp 10,500 per kg. Tuafik fears that if this condition lasts, farmers will reduce the acreage for sugarcane cultivation. “If this continues, some sugar factories could close down,” Taufik said.
A similar point was made by Olean sugar factory spokesperson Fitro Hariyadi. “Farmers cannot sell sugar yet, because the selling price of sugar is still below its production cost. Meanwhile, farmers need money for cutting, transporting and grinding operations up until December,” he said.
Fitro said the impact of the sugar price fall had seen freshly ground sugar pile up at warehouses. Sugar will not be sold yet because the selling price, which refers to the price of auction, is still below the cost of production.
Sugar piling up
Farmers’ sugar is also piling up at factories in a number of other regions. This is because the buyers’ bid of Rp 9,200 per kg at the auction is lower than the production cost of Rp 11,000-Rp 13,000 per kg. The auction price tends to be low because, among other things, buyers have to account for the 10 percent value added tax (VAT).
PT Perkebunan Nusantara XI executive director Cholidi said in Surabaya on Friday that almost all sugar factories in and around PTPN XI were in the process of grinding. At the moment, 213,000 tons of sugar belonging to farmers, PTPN XI and traders have piled up in factories, because it has not been absorbed by the market.
A similar condition is found at the warehouses of PTPN X. Firda Suraida of PTPN X’s public relations department said two attempts to auction off farmers sugar had not been successful. Up to 10,000 tons of sugar were bid for by a buyer at Rp 9,710 per kg. In a second bid for 5,000 tons of sugar a buyer offered Rp 9,525 per kg.
As of today, PTPN X has a stockpile of 135,799 tons of sugar. The stocks will continue to increase, because 10 sugar factories in the PTPN X area, including PG Modjopanggang in Tulungagung, PG Ngadiredjo in Kediri and PG Watoetoelis in Sidoarjo, are still grinding farmers’ sugarcane.
The PTPN XI regional leaders council head of the Indonesian Sugarcane Farmers Association, Sunardi Edi Sukamto, said the auction prices were low because buyers were taking into account the 10 percent VAT and the maximum retail price (MRP) of Rp 12,500 set by the government.
Because of this, farmers were unable to reap the rewards of a whole year of farming, even though they have already grounded their sugarcane. This is unfortunate, as the farmers’ daily needs cannot wait for long. “The installments on sugarcane farmers’ loans cannot be delayed; they need to be paid every month,” he said.
To protect farmers, Sunardi hopes the government will increase the maximum retail price to Rp 15,000 per kg, 1.5 times the price of rice, as was the case in the New Order era.
Reviewed in depth
In Jakarta, Trade Minister Enggartiasto Lukita said the setting of the maximum retail price at Rp 12,500 for white crystal sugar was based on prior in-depth study. The price was considered reasonable as it gives farmers profits but also prevents the sugar price from getting too high for consumers.
Regarding the tax, Enggartiasto explained that farmers were not charged VAT in selling their sugarcane. However, sugar traders are still charged VAT, so the sugar price of farmers is also affected.
The State-Owned Enterprise Ministry’s deputy for agroindustry and pharmaceutical businesses, Wahyu Kuncoro, said sugar was not yet categorized as one of the strategic food commodities that are VAT-free.
