InfoSAWIT, JAKARTA – The B40 biodiesel development policy, which began implementation in early 2025, is considered to pose a high risk of causing a national palm oil deficit. As a result, the supply of cooking oil for domestic food needs may be disrupted. This situation arises due to a projected 5.1% decline in national palm oil production this year, attributed to an increasing number of palm oil plants entering unproductive age and requiring replanting.
On the other hand, domestic demand for palm oil continues to rise in line with the implementation of biodiesel policies and other national programs such as Free Nutritious Meals. However, biodiesel development should not be resolved by expanding palm oil plantations, which could trigger deforestation. According to reports from various civil society organizations, a 40% blend (B40) in biodiesel could require an additional 138,000 hectares of palm oil land. Meanwhile, there are alternative solutions that the government can pursue without opening new land.
"We estimate that the CPO raw material requirement for implementing B40 could reach 14.8 million MT, an increase of 31.3% compared to 2024. This will trigger a surge in domestic CPO demand, especially as the government also implements the Free Nutritious Meals program," said Marselinus Andry, Head of the Advocacy Department of the Palm Oil Farmers Union (SPKS), in a statement to InfoSAWIT on Friday (February 7, 2025).
The implementation of B40 is expected to increase the national biodiesel quota to 15.6 million kiloliters from the previous 12.98 million kiloliters in the B35 program. SPKS believes that this policy has the potential to cause a national palm oil deficit of 1.04 million MT due to the imbalance between domestic production and consumption.
The government is striving to ensure the availability of raw materials for the domestic industry by tightening exports of palm oil mill waste (Palm Oil Mill Effluent/POME), high acid palm oil residue (High Acid Palm Oil Residue/HAPOR), and used cooking oil (UCO). This policy is regulated in the Minister of Trade Regulation No. 2 of 2025, which took effect on January 8, 2025. However, this policy is considered insufficient to address the root causes of the palm oil deficit and may disadvantage independent palm oil farmers supplying raw materials to palm oil mills.
"CPO production from independent palm oil farmers has significant potential to meet domestic biodiesel needs. The government needs to regulate the supply chain from independent farmers, including the supply of fresh fruit bunches, so they can contribute to biodiesel production," added Andry.
Currently, the biodiesel industry supply chain still relies on large corporations and has not yet involved independent farmers' cooperatives. Indonesia has approximately 5.31 million hectares of independent palm oil plantations that could potentially produce 14.87 million MT of CPO per year, a sufficient amount to meet the B40 biodiesel production needs. Additionally, used cooking oil could also serve as an alternative source of biodiesel raw materials, which has yet to receive support from subsidies from the Plantation Fund Management Agency.
The palm oil deficit also raises concerns about shortages and rising cooking oil prices. The situation that occurred in 2022-2023 is feared to recur. Even the Fixed Retail Price (HET) of subsidized cooking oil "Minyak Kita" has increased from Rp 14,000 to Rp 18,000 per liter as of November 2024.
According to Achmad Surambo, Executive Director of Sawit Watch, the allocation of CPO must be clearly regulated to prevent competition between food and energy needs. "The two CPO prices currently applied create a tendency for the industry to prefer selling CPO to the biodiesel sector, which has a higher economic value compared to the food industry," he said.
In a study conducted by Sawit Watch, Satya Bumi, and the Clean Transition Coalition in the book "Prahara Minyak Goreng: The Impact of Biofuel Policies on Cooking Oil Supply," the government is advised to conduct a comprehensive evaluation of palm oil governance. Steps that need to be taken include monitoring cooking oil distribution, maintaining HET stability, and reforming the palm oil industry to involve independent farmers more.
"Palm oil intensification should be prioritized to increase productivity, not land expansion that will lead to deforestation. We must ensure that the B40 policy does not trigger a recurrence of cooking oil shortages and price increases in 2025," emphasized Achmad. (T2)
