The Industry Ministry has agreed to inject Rp 50 billion (US$5 million) to state owned sugar makers in a bid to revitalize the sugar industry and to attain self-sufficiency by 2014.
The fund will be distributed in the form of 10 percent subsidy for every purchase of new machinery by nine state sugar companies.
The nine companies include PT Perkebunan Negara and subsidiaries, PT Rajawali Nusantara Indonesia and subsidiaries, and PT Madu Baru - a joint venture between the Yogyakarta Sultanate and the government.
"I am confident that sugar production will increase rapidly this year due to the revitalization project and the good price of sugar nowadays which *has* reached around Rp 7,500 for a kilogram of sugar," said Director General for Plantations Ahmad Manggabarani on Monday.
Ahmad was present at the Industry Ministry to represent the Agriculture Ministry in the signing of an agreement for the distribution of funds with the Industry Ministry.
The government subsidy does come with a condition. Director General for Metal, Machinery, Textiles and Miscellaneous Ansari Buchari said machines purchased by the companies must be entirely assembled in Indonesia and with a minimum 40 percent local content.
Under the scheme, the companies must first buy the new machines and then request reimbursement by the Industry Ministry, with validation by the Agriculture Ministry.
Currently Indonesia has at least 58 sugar refineries relying on machines generally older than 20 years and with each refinery able to produce 3,000 tons per day.
The machines in refineries nowadays are only able to produce 7 percent of sucrose content from the sugar cane crop, meaning that from 100 kilograms of sugar cane, the refineries can only make 7 kilograms of sugar, Ahmad explained.
"With the revitalization, government hopes that the machines would be able to produce at least 8 percent of sucrose content from sugar cane crops," Ahmad said.
On average, the use of new machines would boost production capacity per existing unit to 3,200 tons per day and also help the companies to improve energy efficiency.
Ahmad Manggabarani said the local sugar industry was aiming to supply national household demand (about 2.7 million tons last year).
In line with the revitalization program, national sugar production was forecast to reach 2.9 million tons this year, said Ahmad.
As for industries that rely on refined sugar as raw material for their production, they rely on imports.
By 2014, he said, the government hopes that the country can become self-sufficient for sugar for all domestic demand, both for households and for industrial use.
Ahmad said that improving efficiency in sugar refineries is the key to reaching self-sufficiency. (mrs)
