Indonesia plans to develop sugar-based industry in Papua region

Indonesia, the world's biggest sugar importer, plans to boost sugarcane planting in its eastern region of Papua, aiming to cut imports and develop a sugar-based industry, including producing bioethanol, a cabinet minister said on Monday.

The plans were announced as domestic sugar prices soared amid tight supply, as last year's drought brought on by the El Nino weather phenomenon hurt crops.

Indonesia's government in 2022 set a target of becoming self sufficient in sugar by 2027. To do that, it must significantly expand plantations.

The government has identified 2 million hectares (4.9 million acres) of land in Merauke, South Papua province, for an industrial estate for sugarcane plantations, mills, a bioethanol plant and a biomass power plant, Investment Minister Bahlil Lahadalia told reporters.

"For the first phase, there will be two million seedlings coming from Australia," Bahlil said, adding domestic companies, including state-owned firms, will lead the project.

He did not provide details on the timeline for the industrial estate development. It was unclear whether the plans would include any forest clearance.

Currently, average domestic sugar price has risen 24% from a year earlier to 18,344 rupiah ($1.13) per kilogram amid tight supply, government data showed on Monday, due to weak output.

The country's sugar mills association expects the milling season to be delayed by a month to end of May this year.

"El Nino driven drought damaged the (sugarcane) crops, some had to be replanted. ... The sugarcane are not ripe yet, the beginning of milling season will be late," said Dwi Purnomo Putranto, executive secretary of Indonesian sugar mills association.

Exacerbating this was a 14.4% drop in last year's sugar imports to 5.25 million metric tons, as global prices hit multi year highs, which meant stocks were low at the beginning of 2024.

($1 = 16,250 rupiah)