InfoSAWIT, BOGOR – Gulat Medali Emas Manurung, the Chairman of the Central Executive Board of the Indonesian Palm Oil Farmers Association (APKASINDO), expressed his concern that the implementation of the B40 biodiesel policy has not positively impacted the prices of fresh fruit bunches (TBS) for smallholders. During a workshop for palm oil industry journalists attended by InfoSAWIT in Bogor on Saturday, February 22, 2025, he presented various data and facts regarding the decline in TBS prices.
TBS Prices Plummet by IDR 550-600 per Kg
Gulat revealed that TBS prices have drastically dropped by IDR 550-600 per kg from January to February 2025, with the current average price at only IDR 2,450-2,500 per kg, compared to IDR 3,000-3,800 per kg in October, November, and December 2024. "This means that with a total plantation area of 12,500 hectares, smallholders are losing IDR 9 billion per month due to the decline in TBS prices. If we consider the total productive plantation area of around 4,122,000 hectares, the losses could reach IDR 2.96 trillion per month," he emphasized.
He attributed the price drop to the issuance of Regulation of the Minister of Trade No. 02 of 2025, which governs the export of palm oil derivative products. This regulation also tightens the administration of exports for High Acid Palm Oil Residue (Hapor), Palm Oil Mill Effluent (POME), and Used Cooking Oil (UCO).
With the new regulations, exports of Hapor, POME, and UCO have effectively halted due to burdensome administrative requirements. Consequently, these products have accumulated domestically, which biodiesel producers are now using as substitutes for Crude Palm Oil (CPO) in biodiesel production, Gulat explained.
The issue lies in the fact that Hapor and POME are significantly cheaper, priced between IDR 9,000-12,000 per kilogram compared to CPO at IDR 13,875/kg. This creates an opportunity for biodiesel producers to mix these cheaper alternatives, while the pricing for biodiesel remains tied to CPO prices, which could potentially harm state finances, he elaborated.
Impact on TBS Prices
So, how does this relate to TBS prices for palm oil smallholder? It is directly connected because the essence of the mandatory biodiesel policy is to maintain CPO prices through domestic absorption. If domestic CPO absorption increases, the availability of CPO for the global market decreases, thus applying the law of supply and demand.
If CPO prices rise, TBS prices will naturally follow suit. However, due to stagnant domestic CPO absorption following the implementation of B40 in mid-January 2025—due to the substitution with POME and Hapor—the benefits of the B40 policy have yet to be felt by palm oil smallholder, who have instead seen an average decline of IDR 550-600 per kg in TBS prices from January to mid-February.
"The funds used to cover the difference between the biodiesel price and fossil fuel prices are being passed on to our TBS prices. With the export levy for February 2025 set at USD 71.66 per MT of CPO, the price of TBS for smallholder will be pressured by IDR 230 per kilogram. Ultimately, any burden in the downstream sector falls on the upstream sector. It’s only natural that we feel disheartened," Gulat stated.
Gulat Manurung urged that to prevent further losses for the state and smallholder, immediate actions are necessary: first, an audit of the raw materials used by biodiesel producers; second, the government should issue reference prices for POME, Hapor, and UCO; and third, a review of the Ministerial Regulation should be conducted.
"We, the palm oil smallholder, fully support President Prabowo's stance on energy independence, particularly in terms of budget savings and optimizing state revenue. So why is the Ministry of Trade not aligned with this policy? Exports generate foreign exchange for the country, increase state revenue through export duties, and the BPDPKS needs income from export levies. Why then are exports being restricted under the guise of tightening regulations? The real issue is that if there are no buyers abroad for Hapor, POME, and UCO, we face a significant problem," Gulat remarked.
He emphasized that the focus should be on increasing CPO production through the productivity of smallholder plantations if the goal of the Ministerial Regulation is to provide raw materials for biodiesel. This can be achieved through the Palm Oil Revitalization Program (PSR), which requires substantial funding from export levies to boost its effectiveness.
"The BPDPKS has been fulfilling its duties, especially after the PSR funding increased to IDR 60 million per hectare. However, the challenges lie in the complicated and lengthy requirements for the PSR, resulting in only 30-40% of targets being met each year. This is an issue that needs collective action from the relevant ministries and agencies," Gulat concluded.
In closing, he reminded all stakeholders in the palm oil industry to support one another, emphasizing the concept of nurturing the larger entities while growing the smaller ones, as failure to do so could lead to recurring issues in the future. (T2)
