The program launched by the Government in April 2018 to intensively rejuvenate oil palm plantations is still far from expectations, with many smallholders mentioning that the program is still confusing.
“It is unclear. There are many confusing requirements, resulting in very few interests,” said Valens Adi, an independent oil palm smallholder who is also the Chairman of the Harapan Tani Village Unit Cooperative in Sanggau District, West Kalimantan.
When contacted by The Palm Scribe, Adi said that most independent smallholders also faced major problems such as completing legal documents.
Lost and reduced income is also one of the farmers’ complaints when participating in the replanting program. According to Adi, to overcome the problem, an additional implementation program is needed.
Farmers complained about not only the high cost of plant rejuvenation, often referred to as “replanting”, but also the lack of income farmers have during the three or four years of unproductive plantation.
“What is the solution? The replanting is done gradually and partially, so farmers can still get income,” he said.
The funding assistance from the Palm Oil Fund Management Agency (BPDP-KS) worth Rp25 million per hectare of oil palm plantation, which is given at most for five hectares per person, is still considered far from enough. Farmers still have to cover the rest, as the cost of rejuvenation per hectare ranges from Rp60-70 million.
“Twenty-five million is only enough up to the planting period but after that, there should be a program to help farmers get income during the rejuvenation period,” he said.
The replanting program has been slow. The data from the Director General of Plantation per December 2018 shows that only 33,671 hectares out of 185,000 were targeted for replanting in that year.
Nevertheless, Sumatera Selatan Bank Marketing Director Antonius Argo Prabowo said that he was optimistic about the continuity of the replanting program. The bank also helped disseminate aid funds from BPDP-KS.
“Palm oil land rejuvenation programs are considered as successful programs and support sustainable development efforts,” he said.
According to the Green Trade Initiative Country Director Fitrian Ardiansyah, the replanting program is not the sole responsibility of the Government, the private sector also plays important roles. He said that the funds allocated from BPDP-KS are insufficient.
“The BPDP-KS assistance fund is not from the state budget, it is from the palm oil export levies. To (partially) cover replanting costs, especially for 4 years of living expenses waiting for the palm to bear fruit again, it clearly requires other additional funds,” Fitrian said when contacted by The Palm Scribe.
A suitable financing structure model is crucial for replanting programs to be implemented on a large scale and involve many parties such as the Government, financial institutions, and national and international private sectors.
“Please remember, 1 hectare of replanting requires at least around Rp60 million/ha for 4 years, apart from bank interest and farmers’ income subsidies while waiting for palm oil to produce more,” he explained.
In addition to funding problems, Fitrian also highlighted the ease of obtaining land clarity so that it could help make the distribution of existing aid funds smooth.
“The Government can support the smallholders by simplifying or clarifying the land legality, STDB (Cultivation Certificate), forest areas, interest rates, OK rules, blended finance, foreign exchange hedging costs, access to quality fertilizers and quality instructors. These things can at least help other financial institutions to smoothly assist the replanting programs in Indonesia,” Fitrian concluded.
This replanting program is part of the Government’s efforts to increase the oil palm plantation productivity, which is still very low. The increase is expected to help reduce plantation expansion and thereby, reduce environmental damage.