The Indonesian Palm Oil Farmers Association (APKASINDO) revealed problems in the downstreaming of the palm oil industry which is considered to be still not optimal because the role of oil palm smallholders is still minimal.
Gulat Manurung, Chairman of APKASINDO’s Central Executive Council said that the government should encourage palm oil farmers to progress with various derivative products, including in the form of Crude Palm Oil (CPO).
“The government letting oil palm farmers stay upstream is a big mistake. The downstream problem in the palm oil industry is simple, just give the smallholders a role to play,” he said, on August 14, 2023.
Downstreaming policy harms smallholders
In this policy of downstreaming the palm oil industry, the smallholders are the ones who suffer because the amount of investment required is quite large to build a factory with a minimum of 30% of the total investment.
Gulat explained that this condition caused difficulties for farmers to process their products independently. Meanwhile, getting funds from the Oil Palm Plantation Fund Management Agency (BPDPKS) is not easy.
“Our money is managed and distributed by the BPDPKS, why can’t we take it? Why would the [BPDPKS] directly give it to the biodiesel program, this is injustice,” he said.
Rejuvenation program missing its target
Meanwhile, Gulat highlighted that one of the National Strategic Projects (PSN) for smallholder oil palm rejuvenation was considered insignificant. In oil palm rejuvenation, since 2017, progress has only reached 258,000 ha of the target of 500,000 ha.
“The only way for us [palm oil farmers] to get in there is by entering downstream, downstream can also be successful if we are successful in PSN,” he said.
Government responds to criticism
Eddy Abdurachman, President Director of BPDPKS, does not deny that there is a stigma that the government is more supportive towards palm oil entrepreneurs, especially those engaged in the biodiesel sector.
According to him, this is happening because there is indeed the largest proportion of BPDPKS funds currently allocated to finance the development of biofuels derived from palm oil in the form of biodiesel.
“Because the biodiesel program is a very important program, especially for the sustainability of the palm oil industry,” he said.
The government designed a priority program for biodiesel in order to create a healthy domestic market so that the absorption of palm oil production increases from year to year.
He explained, before there was a biodiesel program, the export market dominated the absorption of local palm products. Meanwhile, its use is very important in supporting the food, oil-food, and chemical industries.
“This has an impact on us being very dependent on the export market, where the price of palm oil is determined more by foreign markets,” he said.
“Last year it could reach 9 million metric tons. The absorption of biodiesel was so large that it had a positive impact on stabilizing domestic palm oil prices,” he concluded.
