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4 Policy Breakthroughs for Indonesia’s Palm Oil to Re-get Its Glory

Foto by Dea Kinanti_Sawitfest 2021/ilustration of plantation
4 Policy Breakthroughs for Indonesia’s Palm Oil to Re-get Its Glory

InfoSAWIT, JAKARTA - Prabowo Subianto, the president candidate that could win the 2024 president election on 14 February 2024, described his new renewable development plans. It would cover higher vegetable fuel mixture (biodiesel) to diesel to be more than 50 percent or B50 which it is now B35 only, and he also introduced bioethanol 10 percent or E10 in 2029.

The target of renewable energy may seem realistic because Indonesia is the biggest palm oil producer in the world within annual production more than 50 million tons and expanding its palm oil plantations.

Coordinator Minister in Maritime and Investment, Luhut Binsar Panjaitan always mentioned that Indonesia would produce 100 million tons per year sustainable in 2045.

Indonesia has been implementing biodiesel mandatory program in crude palm oil (CPO) base since 2008 and sold B35, which is the mixture of 35 percent biodiesel from palm oil with fossil fuel.

But as long as it relates to (crude) palm oil which now becomes the biggest source of vegetable fuel in Indonesia, it may have no good prospect. CPO production got decreased for the past four years though Indonesia still have more than 16,8 million hectares (ha) palm oil plantations.

The latest official data showed 1,5 million ha (9 percent) of the total plantations were immature and 14,5 million ha or 91 percent were productive. But 46 percent of the productive trees (plantations) were old and the productivity got decreased.

CPO production in 2005 - 2010 could be higher 10 percent per year. It happened for massive palm oil plantation expansion but the annual production decreased to be 7,4 percent in 2010 - 2020 and even got decreased to be 3,2 percent in 2015 - 2020, then stagnant or to be negative in 2020 - 2023. What it worse it that palm oil plantation productivity is almost stagnant in Indonesia.

Data from Indonesian Palm Oil Association (IPOA) showed that CPO production reached 53 million tons in 2023. 11,6 million tons were used to produce biodiesel, 10,4 million tons for food (mostly to produce palm cooking oil), 2,3 million tons for oleochemical, and the rests were for export activity. For CPO consumption got increased in this country, some analysts were sorry that the increasing target in biodiesel production would have something to do with CPO supplies for food and other industries. That is why, the targets to realize B50 in 2029 need reasons because CPO production could be always decreasing without any breakthrough from the government.

That is why this would be significant for the new president (government) to introduce coherent policy(ies) to revitalize palm oil plantation development as the mainstay of economy in this country, and to escalate CPO production to fulfill CPO consumption which keeps increasing for food, biodiesel and other industries.

There would be four policy breakthroughs which are coherent to fulfil production targets which keep increasing without influencing the commitment of Indonesia to realize carbon emission reduction but accelerating transition to renewable energy.

The first is to review every regulation (policy) that has something to do with palm oil, and revise the regulations which are bad for palm oil industries. One main obstacle for the industries to realize vegetable fuel development target in CPO base is Chapter 110B Undang-Undang Cipta Kerja (UUCK). The chapter regulates that palm oil plantation companies that operate in forest regions though having permit or in the areas that break regional government spatial plans, should pay fine and would get permit to continue its operational for the next one cycle or until the next 15 years.

The audit that the government recently did, concluded that 2.128 palm oil plantation companies where they are mostly in Sumatera and Kalimantan with the total palm oil plantations about 2,17 million hectares, should obey Chapter 110B. If it is not substituted, the companies would not be able to continue their operational. It means annual production about 6,9 million tons would be no more. The new government should do something to substitute the chapter.

The second, knowing that palm oil plays more significant and vital roles in the economy, and as one sector to work at, the second biggest commodity, source of food, vegetable material, other consumers’ goods, and other facts, showed that 42 percent of the total palm oil plantations belong to more than five million smallholders. The industries need integrated regulations. This can be realized if every policy about palm oil industries should be formulated and conducted by one government agency.

There are nine national scale – institutions that directly and indirectly regulate palm oil industries. They sometimes published regulations which compete one to another, are overlapping, and even contra-productive. One sample is that palm oil plantations solution in overlapping areas with forest regions that Ministry of Environment and Forestry should manage. But because of the vision and mission of the ministry are contra with palm oil development, the authority to solve the issues (with palm oil industries) should be minimized.

The third is about the policy(ies) about palm oil use for many needs, namely biodiesel and palm cooking oil in this country or for export activity. These should be harmonized and synchronized with national scale - production and capacity to prevent unnecessary competition. In this context, CPO biodiesel production target should be re-studied in a whole to prevent CPO supplies for consumption in this country and for export activity.

The last, it is unavoidable that palm oil production should be maintained by every effort to escalate productivity and plantation expansion to escalate harvest productivity. But the new planting or expansion should be in the undeveloped provinces, such as, Papua. That is why Papua as high forest cover landscape (HFCL) that makes most of the region be banned to develop palm oil, needs revision to enable new regions to develop sustainable palm oil.

The policy would disappoint many environmental non-government organizations, and may be taken to break European Union Deforestation Regulation. but Indonesia has vital needs to develop sustainable palm oil in Papua because this could be one most effective way to accelerate economic development in underdeveloped regions to the same progress – level as other regions have got in this country. (*)

By: Edi Suhardi/Systainability Analyst