The Palm Scribe

Mini Mills, a Tool to Empower Palm Oil Smallholders

Palm oil mini mill

For most independent palm oil smallholders, dependence on large mills which are generally far from their plantations is affecting their earnings and therefore mini palm oil mills may be the answer they have been waiting for.

Plantations owned or operated by smallholders, including independent ones, now account for about 40 percent of the total surface of palm oil plantations in the country. They are also widely dispersed small plots that are situated far from major mills that tend to be in or near large corporate plantations.

“These palm oil plantations are widely dispersed and are far from access (to mills) and therefore we can centralize them near these plantations. This will also help cut on fuel cost, too,” said Nadhariyat Syafei, Co-founder and Business Director of PT Naga Jaya Lestari, a company producing mini palm oil mills that can be built at an investment cost of about Rp900 million.

These mini-mills can provide more processing centers that would also be closer to the plantations of independent smallholders, therefore, they not only lower transportation costs but also provide the farmers with more options to sell their fresh fruit bunches (FFBs) and thus allow them to get better prices.

“We are also offering an added value. We directly can process into and sell products in the form of CPO (Crude Palm Oil), and not TBS (FFBs),” Syafei told the Palm Scrive adding that the farmers could thus obtain higher prices for the products of their plantation.

At present, the mills have drawn the interest of smallholders as well as local palm oil enterprises in a number of regions such as in  Aceh, Riau, Kalimantan, and Sulawesi.

“We have now a total of 15 mini mills. Four of them have been already running while the rest are still in the construction phase,” Syafei said, pressing further that the construction of a mill can take between three to seven months depending on the geographical condition and the equipment installation phase.  

“In building our mills, we are of course taking the sustainability aspect and the land permit into consideration and there should be minimum of 400 hectares,” he said, with the latter referring to the minimum surface of plantation needed to assure an adequate supply for the mini-mills.

The mini-mills currently can have capacities of up to five tons per hour and produced Crude Palm Oil that meets the quality standard of the Indonesian Sustainable Palm Oil (ISPO). The mills only need five people to operate.

Syafei also assured that the waste produced by the mini-mills would not harm the environment.

“In line with the procedure, we are minimalizing the waste by processing it into HACPO (High Acid Crude Palm Oil) and the remaining waste is very limited, at around four cubic meters per day,” he explained.

However, he also admitted that there were quite a few constraints in building the mini-mills. He cited the availability of adequate electricity to run the mills, as well as the need to educate local farmers. “The farmers’ lack of education, the farmers would plant whatever they can plant without any knowledge of their benefit. That means we have to educate them that they need to put a value on their own welfare,” Syafei said,

The technology for the mills is devised by Syafei’s team and not imported from overseas. “We developed our own technology and we purposely did not patent it so that it could help farmers,” he said.

“We hope that it can spread across all Indonesia in the next five years so that farmers are much more encouraged and from the development aspect, I want that the palm oil industry goes digital,” he said, adding that he also had a wish to give a role for independent palm oil smallholders in this era of free trade.

Vincentius, who heads a palm oil cooperative in Sanggau, West Kalimantan, said that the concept of mini-mills could help increase the role of smallholders in the industry.

“The small mills can really help us become subjects in the industry whereas previously we were merely the objects, and of course, we can then not be bound to conglomerates,” said Vincentius who has already invested and worked together with others in using a mini mill.

Talking to The Palm Scribe, he said that the constraint faced by most smallholders in getting to build a mini-mill is its financing because, according to him, there were no regulations governing financial assistance for farmers in such an investment.

He stressed that he himself was also an independent palm oil farmer who was not tied to any association or organization. “We are not tied to anyone. What would be the advantage? What would be the function? All of those organizations have agendas,” he said.

Meanwhile, PT. Bentang Alam Indonesia CEO Agus Sari criticized the quality of the processed products of the mini-mills. “Good export markets certainly needs RSPO, not only ISPO. There is a need to see whether these mini-mills can comply with RSPO,”

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