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Boosting Palm Oil Productivity for Indonesia's Alternative Energy Future



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Boosting Palm Oil Productivity for Indonesia's Alternative Energy Future

InfoSAWIT, JAKARTA - Indonesia's palm oil industry faces a significant challenge: low productivity. Despite advancements in agronomy, plant breeding, and processing techniques that have increased the potential yield of crude palm oil (CPO) from 19% to 27%, the reality on the ground is far from expectations. The current potential production of Fresh Fruit Bunches (FFB) reaches 8 tons of palm oil per hectare per year, yet actual productivity is only 2.8 tons per hectare per year. This means that productivity realization is only 35% of its potential, which is concerning.

One of the main reasons for low palm oil productivity is inadequate fertilization. Many plantations, whether owned by smallholders or large companies, are not optimally fertilized. In state-owned plantations (PTPN), for example, fertilization is often insufficient, with some plants receiving no fertilizer at all for 3-5 years before replanting. Yet, oil palm is a hybrid plant that is highly responsive to fertilization.

The problem is that fertilization recommendations often do not consider their economic impact. As a result, the quantity and composition of fertilizers applied do not match the required doses. The high cost of fertilizers also poses a challenge, even though economic analysis shows that fertilizing up to 10 kg per tree per year remains economically viable.

To address this issue, providing subsidized fertilizers could be a quick solution. With fertilizer subsidies, palm oil productivity could increase significantly. A simple calculation shows that subsidizing fertilizers for 17 million hectares of palm oil plantations would require around IDR 90 trillion. However, the impact would be much greater: state revenue from export duties, levies, and VAT could reach IDR 186 trillion. This means that fertilizer subsidies are not a waste but rather a profitable investment.

Additionally, implementing Production Force Management methods can enhance fertilization efficiency. This method focuses on "root management" and "canopy management," which improve nutrient absorption and the plant's photosynthetic capacity. With this method, productivity can increase by 30-100%, while fertilizer costs can be reduced.

Another often-overlooked issue is the infrastructure of production roads. Many palm oil plantations with high production potential cannot transport their fruit to factories due to poor road conditions. Improving this infrastructure should be a priority to ensure that harvests can reach factories smoothly.

Moreover, coordination among various agencies is a significant hurdle. At least eight agencies are involved in managing the palm oil industry: the Ministry of Agriculture, the Ministry of Industry, the Ministry of Trade, PT Pertamina, BPDPKS, ATR, local governments, and banking institutions. To resolve this issue, a special body is needed to coordinate all relevant agencies.

State-owned plantations like PTPN play a strategic role in enhancing national palm oil productivity. Currently, productivity in PTPN reaches 51.3% of its potential, higher than private plantations (43.04%) and smallholder plantations (31.99%). PTPN can be tasked with developing new areas, mentoring plasma farmers, and taking over abandoned private plantations.

By optimizing the role of PTPN, state revenue from taxes, export levies, and dividends could increase significantly. This revenue could even double the value of the fertilizer subsidies provided.

National palm oil production is not only crucial for meeting domestic and export needs but can also serve as a powerful political tool. In the context of diplomacy and energy resilience, palm oil can be Indonesia's asset to reduce dependence on fossil fuel imports. The B-100 program, for instance, could be a long-term solution to reduce fossil fuel consumption.

However, to achieve this, Indonesia must increase palm oil production from 50 million tons to 120-130 million tons per year. With the current palm oil area reaching 17 million hectares and the potential for expansion up to 20.5 million hectares, this target can be achieved if productivity is increased to 7 tons per hectare per year.

Concrete Steps Needed:

Fertilizer Subsidies: Optimizing fertilizer subsidies is essential to boost palm oil productivity. The effects will be seen quickly, with increased farmer income and state revenue.

Production Force Management Method: Implementing this method can enhance fertilization efficiency and plant productivity.

Infrastructure Improvement: Production roads must be improved to ensure that harvests can be transported to factories smoothly.

Inter-Agency Coordination: A special body is needed to coordinate the eight relevant agencies for effective collaboration.

Optimizing PTPN's Role: State-owned plantations should be tasked with developing new areas, mentoring plasma farmers, and taking over problematic private plantations.

With these steps, Indonesia's palm oil industry can not only boost productivity but also become the backbone of energy resilience and national diplomacy. Palm oil is not just an economic commodity but also a strategic asset for Indonesia's future. (*)

Author: Memet Hakim / Senior Palm Oil Agronomist, TA Business Recovery & Financial Improvement / Advisory Board Member of APIB & APP TNI
Disclaimer: The article represents the author's personal opinion and is entirely the author's responsibility, with no connection to InfoSAWIT.


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