InfoSAWIT, JAKARTA – The government has finally established a strategic policy to develop Bio-Solar into B40, replacing the initial plan for B50 on August 18, 2024. This move is considered safe as it only reduces the palm oil export quota by 4 million tons, thus not triggering price volatility in the international market.
This development marks an important momentum given the significant growth of national palm oil plantation areas. From just 260,000 hectares in 1973, mostly state-owned, the area has now reached 16.8 million hectares in 2024. With an additional land bank of 3.2 million hectares, the total potential area could reach 20 million hectares.
The government is committed to ensuring the availability of energy at affordable prices. However, the main challenge lies in increasing production. With the potential development of B40 even up to B100, Indonesian palm oil could become a price determinant in the global market.
The advantages of B40 are evident with an octane number of 52.8 and a sulfur content of only 1,500 ppm, making it compatible with European and Japanese diesel engines. This is expected to boost biodiesel consumption in 2025 and beyond.
However, the dominance of foreign companies in biodiesel production raises concerns. Strategic efforts are needed to encourage greater participation from national companies.
Currently, Indonesia's palm oil productivity is only about 35-36% of its actual potential. With normal rainfall in 2025, production is expected to increase by 2 million tons to 57 million tons. However, technical improvements and government support are necessary to drive higher productivity.
One of the main obstacles is the minimal use of fertilizers, averaging only 3 kg per tree per year. This results in low fresh fruit bunch (TBS) yields of around 13 tons per hectare per year. By increasing subsidized fertilizer use and implementing technologies like Production Force Management, productivity can significantly improve.
Impact of Fertilizer Subsidies
Increasing fertilizer subsidies for palm oil could be a strategic move. Assuming the use of 11 million tons of subsidized fertilizer, national palm oil productivity could rise to 65-70 million tons. This subsidy would not only boost production but also positively impact state revenue through export levies and exit taxes.
For instance, with palm oil exports of 25 million tons, tax revenue from export duties could reach IDR 78 trillion. If exports rise to 59 million tons, revenue could soar to IDR 181 trillion. This indicates that fertilizer subsidies are not a burden but rather an investment that yields substantial returns for the state.
This policy would also have positive effects on approximately 13.5 million palm oil farmers. However, currently, smallholder farmers are still subsidizing the use of Bio-Solar, a situation that needs to be addressed. Measures such as increasing fertilizer subsidies, simplifying replanting program procedures, and facilitating agronomic technical engineering can help improve farmers' welfare.
According to the Minister of Agriculture, the development of biodiesel B50 and beyond must align with the availability of raw materials and programs that benefit farmers. Replanting, enhancing infrastructure, and strengthening human resources for farmers are top priorities.
Currently, the ownership composition of palm oil plantations is dominated by Private Large Plantations (55.8%) and Smallholder Plantations (40.34%), while State-Owned Plantations account for only 3.84%. To strengthen the role of State-Owned Enterprises (SOEs), the government could allocate problematic or sellable palm oil land to SOEs, increasing their contribution to 10%.
With a palm oil land base of 20 million hectares, Indonesia has the potential to produce 100 million tons of palm oil annually. If intensification is pursued seriously, production could even exceed this figure.
The development of the B40 biodiesel initiative offers great hope for the national palm oil industry. With proper management, Indonesia can not only meet domestic energy needs but also dominate the global market.
This policy is expected to promote the sustainability of the palm oil industry, enhance farmers' welfare, and strengthen Indonesia's position as the world's largest palm oil producer. Through synergy among the government, industry players, and society, national energy independence is not just a dream but a reality that can be achieved. (*)
