The Palm Scribe

GAPKI’s Lakshmi Sidarta: Develop the Potentials of Domestic Palm Oil Market

Indonesia’s energy would be better spent developing its domestic market for palm oil instead of looking at toward the West to drive sales of the commodity, said the Indonesian Association of Palm Oil Producers (GAPKI) Secretary General in an exclusive interview with the Palm Scribe.

The European Union has added to the long list of rejections against palm oil on the basis of the argument that the commodity’s cultivation causes deforestation, by coming out with a policy that would gradually phase out palm oil-based biodiesel from its renewable energy program.

The Secretary General of the Indonesian Association of Palm Oil Producers (GAPKI), Kanya Lakshmi Sidarta, said that even though in terms of value, Indonesia’s biodiesel exports to the European Union was small, it is feared that it may become a precedent and have a domino effect. She stressed that under a worst-case scenario, where no one would buy Indonesian palm oil anymore, the country’s energy sector could provide the solution.

“I mean, if we want to talk extremes, we should not worry. I am convinced that we would be ready… that is a matter of survival, let domestic consumption absorb it all,” Lakshmi told The Palm Scribe in a recent interview. “This is not impossible, but of course, it would need time,” she added.

She cited the use of biodiesel of various ratio, the use of palm oil to fuel power generating plants, the mixture of palm oil products in gasoline, the use of palm oil industry waste as biomass and many more.

 “If there are no changes in the consumption style and the use of fuels such as it is now, we could even have to import,” she said citing the result of a recent study.

Indonesia currently exports more than 70 percent of its palm oil production, which according to GAPKI reached 43 million tons in 2018, mostly to China and India. Indonesia also exports two-thirds of its biodiesel production that reached 6.01 million tons last year, but only a fifth of that is exported to the European Union.

Lakshmi said that the government’s B20 biodiesel program was already successful in boosting domestic palm oil consumption and it is now even working towards a B30 program for vehicle and even a B100 program for fueling power generators and heavy machinery.

The Indonesian Association of Biofuel Producers (Aprobi) estimates that the B30 program would need some nine million kiloliters of Crude Palm Oil (CPO). A number of ongoing researches are looking into using palm oil products as a mixture for gasoline and testing the use of B100 for power generators and transportation.

Critiques of palm oil, Lakshmi said, also tended to be unfair. As Indonesia is working hard to reach sustainability in its palm oil industry, including by meeting various sustainability requirements for its palm oil exports, the European Union kept coming out with new policies that were unfavorable to the commodity.

However, Lakshmi also aired hopes that the new European Union policy could prompt Indonesia to urgently deal with the various problems still faced by the Indonesian palm oil industry.

“I hope that what is happening in Europe, can become some sort of trigger for everything (unsolved) in Indonesia, such as the many regulations still pending, they should be accelerated,” she said. Among the other urgent matters to deals were also those related to Agrarian and spatial zoning affairs, including the problems of permits.

However, Lakshmi also acknowledged that strong leadership was needed to lead the palm oil sector into sustainability. She cited the example of the successful development of agriculture in Thailand which she attributed to the active and direct involvement of the late king there, that allowed to effectively cut the bureaucratic red tapes and allow supporting regulations to be quickly issued.

 “It is true, there is a need for an executioner. There should be someone who can force it… there is a need for a prerogative right…. We need people who can act fast so that it can proceed well,” she said.

The Indonesian palm oil sector is currently handled in a sectoral manner, with a number of government ministries, institutions, and local governments coming out with their own regulations.

Lakshmi also lamented that critiques of the Indonesian palm oil sector also often ignore the huge advances that have taken place in the industry in its journey towards sustainability, in just the space of a short time.

“We can say that corporations are already all sustainable. Why so? Because they would not play with their investment. For the farmers, it is not that they want to play around, but they actually do not understand and their financial risks are also not as big as those of corporations,” she said.

Sustainability was also in the interest of the corporations, she added, as export was an important revenue for them while buyers and consumers overseas were increasingly requiring stricter sustainability standards.

But what they often forgot is that palm oil in Indonesia is not only produced by corporations.  Small businesses and farmers contributed about 40 percent of the national palm oil output and it was these segments that needed to be brought into the folds of sustainability. And this was a process that needed not only time but also efforts, regulations, and strategies.

 “If one wants to change that, it has to go through a number of phases, while each phase would need not just a short time,” she said.

Lakshmi also that there was yet not globally accepted definition of sustainability and also pointed out that Indonesia also already had its own sustainability standard for palm oil, the Indonesian Sustainable Palm Oil (ISPO).

“Indonesia already has ISPO, and whether good or bad, it is a standard, therefore, please appreciate this as part of our commitment,” Lakshmi said. She added that even though far from perfect, Indonesia remained open to improving ISPO so that the standard could be widely recognized.

“There is an ongoing process, like a transition. We are willing to have this, we will continuously improve it,” Lakshmi concluded.

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