The Palm Scribe

Government to boost smallholder palm oil output through rejuvenation

Medan — With palm oil widely recognized as a main contributor to the Indonesian economy, the government is determined to boost the nation’s output by raising productivity, focusing on rejuvenating the crop of smallholder plantations which cover some 40 percent of the country’s plantation.

Indonesian palm oil smallholder farmers pose with main speakers at IPOS Forum in Medan, North Sumatra on September 28, 2017.

Bambang MM, the  Director General of Plantation of the Agriculture Ministry, told a forum of Indonesian palm oil stakeholders here on September 28 that the government is targeting the replanting of 20,000 hectares of palm oil trees this year.

The replanting, financed from the Palm Oil Plantation Fund which is collected through levies from palm oil exports, is directed primarily at the smallholder farmers.  The government is leaving large plantation companies to conduct their own replanting.

Statistics from the agriculture ministry, cited by Bambang, show that smallholdings in palm oil cover 4.7 million hectares while another 7.2 million hectares are in the hands of large and small private plantation and state-owned plantations.

Palm oil trees begin to lose commercial productivity levels after 25 years and need to be replaced.

Besides the 20,000 hectares, the government is also pledging to help smallholder farmers who are capable, of replanting their own crop.

“We will help the farmers who are capable of conducting replanting in an independent way, are ready and bank-eligible, “ Bambang said.

He added that the industry should also pitch in to help smallholders replant their old crop. He said that the large and medium scale plantations private or state-owned should partner with the smallholders and assist them in getting access to credits up until the crops begin to produce.

“Replanting can only proceed well with the support of all sides,” Bambang said.

But Ponten Naibaho, an expert consultant on palm oil and an auditor with Sucofindo, said that the Government’s replanting target of 20,000 hectares was far from being well thought out. He said, for example, that there appeared to be no priority for the replanting.

“Crops that are already 32 years old needs to be replaced quickly as they are no longer productive, but crops that are 25 years old are the first to be replanted? There should be an order of priority in replanting,” Naibaho said.

The replanting is also directed at registered palm oil plantations.  Bambang admitted that although the official data show the palm oil plantation coverage at 11.9 million hectares, the actual figure was more likely to be over 15 million hectares of many plantations, operated without Cultivating Rights Titles (HGU) or did not register with the authority. Most of these were smallholders.

Bambang said that the crops up for replacement were those that were already too old and also those crops that were cultivated from poor or bad seedlings.

The recipients of the assistance could be individual farmers or groups of farmers.

The criteria include that the plantation must be over 25 years old or has a productivity of fewer than 10 tons per hectare per year. For individuals, the farmers must still be a member of a farmers organization or cooperative.  They also must have a bank account with designated banks.

The assistance is limited to replanting for four hectares per family while for farmers groups it should be at least 50 hectares in the surface.

Asmar Arsyad, the secretary general of the Association of Palm Oil Farmers of Indonesia (Apkasindo) said that another factor that made the government planting assistance rather hard to implement is the financing aspect.

Under the replanting assistance scheme, the government provides funds of Rp 25 million per hectare but the farmers had to pitch in another Rp 40 million through bank credits.

Another hindrance is the fact that many of the smallholder’s plantation had no land certification, Asmar added.

But even if the target of 20,000 hectares is met this year, the amount is still just 1.4 percent of the 1.5 million hectares of palm oil plantation which the agriculture ministry has identified as needing to be rejuvenated across the country.

With the palm oil industry’s productivity still leaving much to desire,  replanting is only one of the ways to try to boost sagging output.

GAPKI figures show that the country’s palm oil output in 2016 dropped to 34.5 million tons compared to 35.5 million tons in 2015.

Share This