The office of the State Minister for State Enterprises revealed Friday that it was in the process of expanding the capacity of the state logistics company, PT Bulog, to control staple food prices such as those implemented in former president Soeharto's era.
"We have held several meetings with related departments to widen Bulog's authority, but the decision is not yet final," State Minister for State Enterprises Sofyan Djalil told reporters in Jakarta.
Sofyan said the plan would basically allow Bulog to stock enough sugar to be able to intervene in the market and influence prices, similar to its current activities used to control the supply of rice.
"The sugar market is marred by unhealthy practices, that can be fixed through Bulog," Sofyan said without going into more detail.
Sofyan suggested that in the future Bulog would also control the price of cooking oil that is also unstable and had a poor market system.
"Actually, we do not have a distribution network for cooking oil. Bulog will be able to build up market networks so the government will be able to control the price of the commodity," he said.
Traditional market intervention will also be carried out by the Trade Ministry to control sugar prices. The ministry says it will conduct market intervention in 18 provinces by selling sugar at prices below market rates to stabilize surging sugar prices.
Trade Minister Mari Elka Pangestu said Friday that market intervention would be carried out by selling sugar at Rp 7,000 (70 US cents) in Java and Rp 7,500 outside Java.
She said the market intervention would be used strictly to supply household needs as each person would only be able to purchase 2 kilograms of sugar, Mari said.
She also said the ministry would provide between 3.5 and 7 tons for each market.
In the domestic market, sugar prices are now far higher than the standard retail price targeted by the Trade Ministry, which is Rp 6,500 per kilogram.
Prices have varied from Rp 10,000 and Rp 11,000 in several regions in the country, for example in West Sumatra and in Papua, prices have pushed the national average to Rp 9,500 per kilogram.
Mari said increasing sugar prices had nothing to do with stocks, as the country had sufficient supplies until one week after the Islamic festivities of Idul Fitri, which will fall on Sept. 21 and 22 after the fasting month.
Data from the Association of Sugarcane farmers (Aptri) shows the current national stock reaches 266,679 tons per month.
Aptri chairman, Arum Saril, said the monthly national consumption of sugar had reached Rp 220,000 tons per month.
Mari said sugar prices had increased due to the impact of surging international prices.
The benchmark price of sugar futures in New York, for instance, has surged 88 percent so far this year, reaching a 28-year high of 23.33 cents per pound on Aug. 12.
This price rally was fueled by concern that a drought might curb output in India, the biggest consumer, and that too much rain was slowing the harvest and cutting yields in Brazil, the largest producer, according to Bloomberg. (naf/nia)
