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Vanishing Every Obstacle in Sustainable Palm Oil in Indonesia

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Vanishing Every Obstacle in Sustainable Palm Oil in Indonesia

InfoSAWIT, JAKARTA – Coordinator Minister in Economy Indonesian Republic, Luhut Binsar Panjaitan believed that Indonesia could sustainably substitute fossil fuel by biofuel from palm oil and would stop fuel import that spent billions of dollars from revenue backup in this country.

“We are still doing research about palm oil as the renewable alternative fuel. We believe that in 2045 we could produce about 100 thousand tons of palm oil. 30 percent of would be allocated for food needs and 70 percent the rests for biofuel,” Pandjaitan said by the early of this year.

He also mentioned palm oil is one of five pillars in green economy that our government prioritized. The other four are decarbonization in electricity, low carbon transportation by massively adopting electric vehicles, green industries and carbon absorption that covers carbon capture and carbon offset market.

As the biggest crude palm oil (CPO), biodiesel, and used palm cooking oil producer in the world, Indonesia obliged to use biodiesel in CPO – base since 2008. The government decided to implement B35 which is the mixture of 35 percent biofuel from palm oil and used palm cooking oil. 65 percent others is fossil fuel. The government also funded biofuel research 15th generation and 2nd, which is environmental gasoline, sustainable aviation fuel, and sustainable diesel.

What Pandjaitan projected to totally substitute fossil fuel by biodiesel fuel from palm oil could be too optimist. But his vision emphasized the important roles of palm oil in Indonesia’s economy, such as, providing works, source of food, consumption goods, and the biggest exporter. This country which is full of good areas to develop palm oil plantations, has big potential and even could triple its palm oil production.

Though Indonesia escalates its palm oil production up to more than 100 million tons, this would not fulfill the markets in this country and others. Palm oil would also play its significant roles in the economy globally, not as the source of biofuel only. The relatively economic commodity would be very useful to fulfill more than 40 percent of vegetable oil demands in the globe. Less than 6 percent from the land (in the world) is to produce vegetable oil.

The big question remains, could Indonesia double its palm oil production from about 50 million tons per year now? The prospect could be blur. The number of potential is one issue but the question is how to realize the potential, is the other issue.

The facts showed that it is sad to know that palm oil production in this country reached its peak and it is getting decreasing. In 2005 - 2010 CPO production reached 10,12 percent per year nationally. It decreased to be 7,39 percent in 2010 -2015, decreased again to be 3,2 percent in 2015 - 2020. In 2020 - 2023, CPO production in national scale would be negative by having contraction 1,15 percent.

We would analyze some major issue in palm oil industries below. We also propose some strategies for the government and other related stakeholders about vanishing every obstacle to realize 100 million tons of palm oil production sustainably.

First thing first, the government and every stakeholder should develop conducive regulations to accelerate sustainable new plantings in every prior region, particularly in Papua, according to Indonesian Sustainable Palm Oil (ISPO) standards, principles and criteria which are available. This is mandated to palm oil Enterprises to prevent oligarchy accusation or preference to private corporates.

Land use rights for plantations should be reinforced. Omnibus Law to deliver employment that many foreign investors gave applaud does consist of regulation to reinforce legal protection, improve climate investment. But at this time, it needs to avoid palm oil task force that decreases (revokes) business rights and plantation permit.

In this context we do hope that the government, in the case of 3,3 million hectares palm oil plantations as the recent audit, are illegally operating because their concessions are overlapping with forest regions, should be solved peacefully. This happened because of overlapping regulations and palm oil plantation companies that got legal business rights after their area status got clean and clear certificates.

The government should not do the same mistake in market distortion which happened in the first quarter of 2022 to solve the expensive palm cooking oil. It is better for the government to publish fiscal policy to solve wildly price fluctuation because against market would be useless.

The second, about 42 percent from about 16,5 million hectares palm oil plantations in Indonesia belonged to smallholders. More than half of theirs are old, get lower productivity. The government tried to solve the issue by delivering fund for smallholders but the output until now is that the replanting just reached 15 percent from 185.000 hectares in national scale. This happened for the unnecessarily administration to get replanting subsidy from the government.

We suggested that replanting program that gets full subsidy runs with other program. The government should provide seeds with higher production to the smallholders so that they could financially do replanting program by adopting best agricultural practices and through agricultural counseling for them.

The third, the government and private corporates need to cooperate to accelerate palm oil plantation intensification program to escalate the harvest which now reaches only 11 tons per hectare or only 44 percent from the productivity potential.

The last, European Union Deforestation Regulation, particularly for palm oil, cocoa, rubber, wood and other commodities that compete with European agricultural products should encourage the government, palm oil industries, and other stakeholders to reinforce cooperation to realize the goal, improve sustainable palm oil governance, and escalate Indonesia’s level in trade relationship in the world.

By: Eddy Martono/Chairman of Indonesia Palm Oil Association

This article is personal opinion