Activity in the Sindanglaut sugar factory looks quiet on Tuesday after the grinding season, in Cirebon regency, West Java. Local sugarcane farmers complain about the slow absorption of farmers’ sugar. Out of 17 auction periods, the farmers’ sugar has only been sold from periods 1 to 10.
NUSA PENIDA, KOMPAS – Trade Minister Enggartiasto Lukita has said the ministry had agreed that sugarcane farmers were free to sell their sugar to either the State Logistics Agency (Bulog) or other buyers. The government’s appointment of Bulog to purchase farmers’ sugar did not mean that farmers were obliged to sell their sugar to the agency.
In an interview with Kompas in Bali on Wednesday (25/10), Enggartiasto said the government had tasked Bulog with absorbing farmers’ sugar at Rp 9,700 (72 US cents) per kilogram. This was agreed upon in a meeting at the Office of the Coordinating Economy Minister.
The decision is the government’s effort to listen and respond to sugarcane farmers’ complaints about the difficulties they faced in selling their sugar. The farmers had also complained that traders offered to buy their sugar at Rp 9,200 to Rp 9,500 per kilogram.
“We will not revoke the decision, as it only binds Bulog and not the farmers. If the farmers do not want to sell their sugar at the price the government has determined, it is up to them whether they sell their sugar to Bulog or not,” the minister affirmed.
Regarding value-added tax (VAT) and income tax, Enggartiasto said that the government had freed the farmers from VAT through the Finance Ministry. Meanwhile, the Finance Ministry has yet to issue a response on whether farmers would be exempt from income tax.
“Income tax is currently paid through special or separate accounts. If farmers are exempted from the tax, the [already paid] money will be returned to the taxpayers. If farmers are not exempted, the income tax will be placed in the state treasury,” Enggartiasto said.
Readying funds
Bulog chairman Djarot Kusumayakti shared Enggartiasto’s sentiments. Djarot stressed in Jakarta that Bulog was serious in absorbing milled sugar produced by either the farmers or the sugar factories belonging to state plantation firm PTPN. However, in absorbing farmers’ sugar, Bulog could not violate prevailing policies and regulations, including those on income tax and the Indonesian national Standard (SNI).
“Bulog is serious and financially capable. There should not be perceptions to the contrary. However, Bulog cannot violate government policies and regulations,” Djarot said.
During a limited meeting at the Office of the Coordinating Economy Minister on Aug. 15, Bulog was appointed to absorb local farmers’ sugar because of plummeting prices. In order for Bulog to absorb the sugar, farmers would need to adhere to the SNI and sell their sugar at Rp 9,700 per kilogram without VAT. Bulog would then sell the sugar in bulk.
However, Djarot said the problem arose when sugarcane farmers, both those with and without a tax identification number (NPWP), were required to pay income tax to Bulog. This was stipulated in Article 22 of Finance Ministry Regulation No. 34/PMK.010/2017 on Income Tax Collection.
“In line with the regulation, Bulog must collect an income tax of 1.5 percent from farmers with NPWP and 3 percent from those without NPWP. If we don’t collect the tax, there will be problems when the Supreme Audit Agency audits us,” Djarot said.
He said Bulog had sent a letter to the Finance Minister to waive income tax in purchasing the farmers’ sugar. However, the minister has yet to respond.
Rp 7 trillion budget
Bulog procurement director Tri Wahyudi Saleh said the agency had set aside a budget of Rp 7 trillion to purchase sugar from farmers and from state-owned sugar factories. Bulog and sugarcane farmers’ associations had signed number of contracts for purchasing 22,000 tons of sugar in East Java.
Similar contracts are planned and several have been signed in other production centers in Central Java, West Java, Lampung and South Sulawesi.
Meanwhile, complaints on the disorganized sugar trade system were still cropping up in Java’s sugarcane production centers. Most of these complaints center on the farmers’ wish to obtain a good price for their sugar.
The farmers deem that Bulog’s sugar purchase price of Rp 9,700 as set by the government is too low and harmful to farmers, as it is below their production cost of over Rp 10,000 per kilogram.
Farmers’ associations want the purchase price to be increased to Rp 11,000 per kilogram. Regional branches of the Indonesian Sugarcane Farmers Association (APTRI) in Java hope that the government will buy their sugar at a minimum price of Rp 11,000 per kilogram.
