T

he government is considering importing more sugar this year to avoid a shortage of sugar in the first five months of 2010, in addition to facilitating the establishment of new mills to secure medium and long-term supply.

Bayu Krisnamurthi, deputy to the coordinating minister for the economy for agriculture and maritime affairs, said Thursday that imports might be necessary as this year's stocks would not be enough to cover next year's demand, while the first five months of 2010 are the local planting season, so there will not be any domestic production.

"In the first five months of 2010 the price of sugar globally will still be volatile, and our *farmers* are not harvesting. This is our concern."

He added that Indonesia might have about 1 million tons of sugar in stock until the beginning of 2010, but that would not be adequate to cover the needs for sugar between January and May next year.

"The pessimistic scenario is the stock will not reach 1 million tons *by the start of 2010* *given* limited imports of sugar," said Bayu.

"So we may have to choose to import sugar," he added, without mentioning figures.

The government has been intensifying recent efforts to help curb soaring prices of domestic sugar , due a combination of rising sugar prices in international markets and stronger demand at home during the fasting month of Ramadan.

The benchmark price of sugar futures in New York has surged by over 80 percent so far this year.

On the domestic front, sugar prices are now far higher than the standard retail price of Rp 6,500 per kilogram. Prices have varied in several regions across the country, pushing the national average price to Rp 9,500 per kilogram.

Indonesia imports about 1.6 million tons of sugar per year to meet national demand, contributing to the current steep rise in domestic sugar prices because import prices reflect the price of the commodity on the international market.

To help prevent this problem from recurring, the government has said it is facilitating that state plantation firm PTPN build three new sugar factories worth Rp 4.5 trillion (US$445.5 million) next year.

State Minister for State Enterprises Sofyan Djalil said earlier the government was exploring the possibility of state banks participating in these projects.

Today Indonesia has 61 mills, of which 68 percent were originally built during the Dutch colonial period and are up to 75 years old. It has been reported that 80 percent of sugar mills are in poor condition and often fail to produce good sugar.