On the other hand, refined sugar purchases can only be conducted through cooperatives. So, if this calculation is really on the mark, the price of consumption sugar should logically rise. The reality, however, is that prices continue to slide downwards – one explanation being that the sugar market is possibly already saturated.
To forestall any further plunge in sugar prices at the farmer level, the Government, through Bapanas, must immediately intervene. On July 21, 2023, Bapanas issued Bapanas Regulation 17/2023, which stipulates that the recommended sugar price for producers is to be IDR 12,500/kg, and the recommended price for consumers is IDR 15,500/ kg in Maluku, Papua and frontier, outermost and disadvantaged regions.
In other regions, the recommended consumer price is IDR 14,500/kg. To assist beleaguered farmers, Bapanas needs to immediately assign ID Food, a state-owned food company, as a “standby buyer” for sugar farmers. When auction prices fall below IDR 12,500/kg, ID Food must step in and make a purchase.
This policy is required to ensure that the market stays relevant to farmers and can yield them some amount of profit. The reality is that from year to year, fading economic incentives are a consistent trend, demotivating farmers and discouraging them from growing more sugarcane. First, profit margins must be transferred from farmers to distributors and traders. In 2006, the margin of distributors and traders was only 10.13%. This means farmers enjoyed almost 90% of the margin. However, in 2017, distributors and traders secured 37% of the margin, meaning that farmers only received 63% – a staggering decline.
Second, the on-the-ground reality is that Indonesian farmers are already shifting away from growing sugarcane to cultivating other, more profitable crops. While 2010 sugarcane planting area was measured at 454,111 hectares, by 2018 acreage had shrunk to 414,847 hectares. Then in 2022 the planting area expanded again, to 488,982 hectares. Nevertheless, there is no guarantee that such acreage can survive or expand if economic incentives are unattractive. Success a response from farmers is to be expected, as they are rational economic creatures, after all. If incentives continue to nosedive, Indonesia must let go of its sugar self-sufficiency target.
In the future, two simultaneous steps are needed to avoid market chaos. First, a single source of reliably compiled data on sugar must be made available for policy reference, including production and consumption data for consumption sugar and refined sugar. What happens now is that different versions of data follow vested interests of relevant ministries or agencies. This occurs not only as a result of conflicts of interest: data discrepancies have also crept in since the Indonesian Sugar Council (DGI), a clearing house that synchronized ministries or agencies’ sugar policies, was disbanded by President Joko Widodo in 2014 for being “extravagant”. The plain fact is that there is an urgent need for an independent clearing house such as DGI, and it should be reconsidered.
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Second, monitoring must be intensified, and punishment with deterrent effects must be imposed. Like it or not, chaos has erupted as a result of weak supervision and law enforcement. Both traders and dominant players in the market persistently cross legal lines, as they know full well they can get away from sanctions, or only receive a mild reprimand. If there are parties – traders or anyone else – who are guilty of misconduct, the Constitution mandates that the state (read: the Government) must bring them to justice.
Trade Law 7/2014 stipulates that hoarders of public essential needs are subject to a sentence of five years of imprisonment and must pay a fine of IDR 50 billion. Likewise, those who manipulate inventory data and information may be sentenced to four years of imprisonment and are fined IDR 10 billion. In Food Law 18/2012, the punishments are even more severe; hoarders can be sentenced to seven years in prison or a fine of IDR 100 billion. These severe sanctions are meant to deter any monkey business with those responsible for the public’s daily sustenance.