The Indonesian government is offering more than a sweet deal to boost investments in the sugar industry with the introduction of a new regulation, which is open for application till the end of May.
Under the Industry Ministry's Ministerial Regulation No. 10/2017 on raw materials incentive, investors establishing a sugar factory in 2010 onwards are allowed to partially import raw sugar so that it becomes easier to kick-start their own plantation.
The ministry's agro-industry director general, Panggah Susanto, while acknowledging the challenges of developing sugarcane plantations, said: "Developing the plantations are not easy as it is costly and business operators face many challenges which starts from establishing the proper land and seedling development,"
"That's why we give them time to develop it in stages while they're able to import the raw materials," he added, according to The Jakarta Post.
Within the first year, the plantation operator will need to source at least 20% of its raw sugar domestically while allowing 90% of the sugar to be imported. In the seventh year of operations, the business owners are required to source 90% of their goods locally with up to 55% from import while the eight years will see businessmen fully sourcing the product locally with a full restriction on imports.
Moreover, the regulation outlines for those starting up factories outside Java have also relaxed and they will be allocated a seven-year timeline to develop a plantation. Those investing in Java have a five-year timeline to begin operations, while those expanding their business in terms of factory or plantation will have three years to complete their expansion.
In February, Indonesia's Trade Ministry imposed a ceiling price for sugar at Rp12,500 per kilogram beginning in March to help regulate the high prices of sugar.
It was reported that the government had issued import licenses to nine sugar producers to import 400,000 tons of raw sugar.
The ceiling price would apply to consumers with the final price of purchase at Rp12,500 with no government regulation on prices from distributors to traders in the market.