imports

Jakarta, VIVA – The Indonesian government is moving forward with a significant policy shift, planning to transfer the import of refined sugar raw materials from private entities to State-Owned Enterprises (BUMNs). This initiative, revealed during a Hearing Meeting (RDP) with Commission VI of the House of Representatives on Wednesday, April 8, 2026, aims to address persistent issues of refined sugar seepage into the consumer market, mitigate losses for state-backed sugar companies like SugarCo, and ultimately accelerate the nation’s journey towards sugar self-sufficiency. The proposal, however, has already drawn sharp criticism from agricultural observers who warn of potential adverse economic consequences.

Background: Indonesia’s Persistent Sugar Challenge

Indonesia, a nation with a vast and growing population, has historically grappled with the challenge of meeting its domestic sugar demand through local production. For decades, the country has relied heavily on imports of raw sugar to feed its industrial refining sector, which produces refined sugar for the food, beverage, and pharmaceutical industries. Concurrently, a separate supply chain exists for crystal sugar, intended for direct household consumption, which is primarily sourced from domestic sugarcane farmers and local sugar mills.

The dual market system was designed to protect local farmers by maintaining stable prices for domestically produced sugar, while ensuring a consistent and affordable supply of refined sugar for industries. However, this system has been plagued by several issues, most notably the "seepage" or diversion of cheaper, imported refined sugar into the retail consumer market. This phenomenon not only undermines the price stability of local crystal sugar, directly impacting farmers’ livelihoods, but also creates unfair competition for domestic mills. Furthermore, the inefficiency of many state-owned sugar mills, coupled with fluctuating global raw sugar prices and inconsistent yields, has made the goal of sugar self-sufficiency an elusive target.

The Government’s New Strategy and Rationale

The RDP on April 8, 2026, saw government officials, including representatives from the Ministry of Trade, Ministry of Industry, and the Food Agency (Badan Pangan Nasional), presenting their case to Komisi VI of the DPR. The core of their argument rests on the need for greater control over the sugar supply chain. By entrusting BUMNs, such as those under the ID Food holding company or specific PTPN subsidiaries, with the sole mandate for raw sugar imports, the government believes it can more effectively:

1. Curb Seepage: Centralized control over imports and distribution channels by BUMNs is expected to make it easier to track and prevent refined sugar from being diverted to the consumer market. Officials cited internal reports indicating that an estimated 15-20% of imported refined sugar, intended strictly for industrial use, finds its way into retail, causing significant market distortions.
2. Support SugarCo and Domestic Mills: The government asserts that the seepage problem directly contributes to losses incurred by state-owned sugar producers like SugarCo (a consortium of PTPN mills). By reducing market saturation from diverted refined sugar, domestic crystal sugar prices can stabilize, improving the profitability and sustainability of local mills and incentivizing sugarcane farming. SugarCo reported a cumulative loss of Rp 3.2 trillion in the period 2023-2025, largely attributed to market imbalances.
3. Accelerate Self-Sufficiency: The policy is positioned as a strategic step towards achieving Indonesia’s ambitious target of sugar self-sufficiency by 2030. Proponents argue that BUMNs, with a national mandate, can coordinate import volumes more strategically with domestic production cycles, optimize logistics, and invest in upstream production capabilities without the profit-driven motivations of private entities. The Ministry of Agriculture projects that domestic sugar production for 2026 will reach approximately 2.8 million tons, while national demand, encompassing both industrial and consumption sectors, is expected to exceed 6.5 million tons, necessitating substantial imports.

Expert Critique: Khudori Warns of Economic Fallout

However, the government’s plan has been met with strong opposition from agricultural experts. Khudori, an agricultural observer from the Association of Indonesian Political Economy (AEPI), was quick to criticize the proposed policy in a statement released on Wednesday, April 15, 2026. He dismissed the transfer of import authority as a superficial fix, arguing it fails to address the fundamental issues plaguing the sugar sector.

"The transfer of imports is not a solution. In supply chain theory, it merely adds another marketing point, which ultimately will entail them (BUMNs) quoting a margin," Khudori stated. He elaborated that this additional layer of intermediation by BUMNs would inevitably drive up the cost of raw sugar. "Ultimately, the price of raw sugar will become more expensive, which will then impact refined sugar factories that use raw sugar as their primary material," he added.

Khudori further explained that any increase in raw material costs would inevitably be passed down the supply chain, first to the refining industries, then to the vast food, beverage, and pharmaceutical sectors that rely on refined sugar. "Ultimately, it is the consumers who will bear the brunt of these increased costs," he warned. He projected that an estimated 5-10% increase in raw sugar prices could translate to a 2-3% increase in the retail prices of various food and beverage products, exacerbating inflationary pressures.

Echoes of Past Failures: Beef and Soybeans

Khudori drew parallels between the proposed sugar policy and previous government attempts to achieve self-sufficiency in other key commodities through BUMN-led import schemes, particularly in beef and soybeans. He cited instances where centralized imports by BUMNs, often lacking sufficient financial capacity and extensive marketing networks, resulted in higher prices for consumers and disrupted market dynamics. For example, efforts to stabilize beef prices by importing buffalo meat via BUMNs in the mid-2010s reportedly led to supply chain bottlenecks and did not consistently result in lower prices for end-consumers as intended. Similarly, BUMN involvement in soybean imports faced criticism for failing to ensure stable and affordable supplies for tempeh and tofu producers, often leading to price spikes.

"Ultimately, consumers had to pay very, very high prices, because eventually, the BUMNs tasked with self-reliance, like PTPPI (Perusahaan Perdagangan Indonesia, a trading BUMN), did not possess sufficient financial capabilities and also lacked extensive marketing networks," Khudori emphasized, suggesting that these historical precedents offer a cautionary tale for the proposed sugar policy.

The Real Root Cause: Weak Oversight and Market Inefficiency

According to Khudori, the core problem of refined sugar seepage into the consumption market is not a matter of who imports the raw material but rather a systemic failure rooted in weak government oversight and significant price disparity between refined industrial sugar and crystal consumption sugar.

"The root problem is the inefficiency of our consumption sugar mills, especially those owned by BUMNs," he asserted. He explained that this inefficiency creates a fundamental gap in the market, necessitating the rigid separation of consumption and industrial sugar. When domestic consumption sugar is expensive due to inefficient production, and refined industrial sugar is comparatively cheaper (even with import duties), the incentive for diversion becomes irresistible. Current market analysis shows that in early 2026, the average retail price for crystal consumption sugar stood at Rp 18,500 per kilogram, while industrial refined sugar (ex-factory, before distribution costs) was approximately Rp 13,000 per kilogram. This Rp 5,500/kg gap provides a strong financial motive for illegal diversion.

He further argued that without addressing the fundamental issues of production efficiency, outdated machinery, low sugarcane yields, and inadequate farmer support in domestic mills, simply shifting import authority will not solve the seepage problem. Instead, it may merely create new avenues for inefficiency and rent-seeking within the BUMN structure.

Supporting Data and Projections

Indonesia’s sugar sector remains a complex web of production, consumption, and imports. In 2025, Indonesia imported approximately 3.8 million tons of raw sugar, predominantly from Brazil, Thailand, and Australia, to meet the industrial demand of around 3.7 million tons of refined sugar. Domestic production of crystal sugar hovered around 2.7 million tons against a consumption demand of roughly 2.8 million tons. This persistent deficit highlights the continuous need for imports.

The government’s plan, if implemented, would centralize control over these substantial import volumes, potentially consolidating procurement power. However, critics argue that BUMNs may lack the agility and competitive edge of private traders, who often have established global networks, efficient logistics, and sophisticated risk management strategies. Industry figures indicate that private importers currently handle over 85% of raw sugar imports, with a few BUMNs managing the remainder, primarily for their own refining operations. Shifting this entire volume would require a massive scaling up of BUMN capacity and expertise in a relatively short period.

Reactions from Other Stakeholders

While the government has yet to officially respond to Khudori’s specific criticisms, statements from various ministries suggest a firm commitment to the policy. A senior official from the Ministry of Trade, speaking anonymously, indicated that the government views centralized imports as a necessary measure for national food security and strategic commodity control. "This is about national interest, ensuring supply stability, and protecting our farmers. BUMNs have a mandate beyond profit; they serve the public good," the official stated.

Meanwhile, industry associations, such as the Indonesian Food and Beverage Association (GAPMMI), have expressed cautious concerns. While acknowledging the need to address seepage, they worry about potential disruptions to supply chains and cost increases. "Any policy that could lead to higher raw material prices or reduce supply certainty for our members would be detrimental to the competitiveness of the food and beverage industry, especially against regional players," a GAPMMI representative commented, urging careful consideration of the implementation details and guarantees for stable pricing and supply. Farmers’ associations, on the other hand, have shown mixed reactions. Some welcome any measure that promises to protect domestic sugar prices, while others fear that BUMN inefficiency might eventually lead to higher input costs for them, or even reduced demand for their sugarcane if BUMN-managed mills struggle.

Broader Implications and Outlook

The proposed shift in refined sugar raw material import policy carries significant broader implications for Indonesia’s economy and its long-term food security goals.

Economic Impact: A potential increase in raw sugar prices due to BUMN intermediation could trigger inflationary pressures across the food, beverage, and pharmaceutical sectors. This would ultimately burden consumers with higher prices for essential goods. It could also diminish the competitiveness of Indonesian manufacturing industries that rely on sugar as a key input, potentially affecting export capabilities and domestic market share.

Policy Effectiveness: The success of this policy hinges on the BUMNs’ ability to perform more efficiently than their private counterparts in procurement, logistics, and distribution, while simultaneously effectively preventing seepage—a challenge that has historically proven difficult even with stringent regulations. If the root causes of seepage (price disparity and domestic inefficiency) are not addressed concurrently, the policy might merely shift the problem rather than solve it, potentially creating a new layer of bureaucracy and cost.

Food Security Goals: While the stated aim is self-sufficiency, centralizing imports through BUMNs might not be the most direct or efficient path. True self-sufficiency requires fundamental reforms in the upstream sector: revitalizing aging sugar mills, improving sugarcane varieties, increasing farmer productivity through modern farming techniques, and expanding land dedicated to sugarcane cultivation. Without these complementary measures, the import policy risks becoming a short-term palliative that delays genuine structural improvements.

Transparency and Governance: The concentration of import authority in BUMNs also raises questions about transparency, accountability, and the potential for rent-seeking. Robust oversight mechanisms will be crucial to prevent corruption and ensure that the BUMNs operate with efficiency and integrity, serving the national interest rather than becoming monopolistic bottlenecks.

As the debate intensifies, the government faces the challenge of convincing skeptical experts and industries that its proposed policy is not only well-intentioned but also structurally sound and capable of delivering its promised benefits without inadvertently harming consumers and key industries. The coming months will be critical in observing how this ambitious plan unfolds and whether it can truly lay the groundwork for a more stable and self-sufficient sugar sector in Indonesia.