The Palm Scribe

Oil Palm Farmers Wants Rp2.8T Subsidy for Biodiesel Industry Scrapped

biodiesel industry

A Rp2.78 trillion government subsidy for the biodiesel industry must be dropped because it only benefited rich corporations while smallholders who operate more than 40 percent of Indonesia’s oil palm plantations but have remained excluded from the biodiesel industry’s supply chain are just left to suffer more, a number of oil palm farmers said.

A number of leaders of members of the Indonesian Association of Oil Palm Farmer Organizations (POPSI) in an online discussion on the biodiesel subsidy and the hike in Crude Palm Oil (CPO) export levy, initiated by the Indonesian Union of Oil Palm Workers (SPKS) on Friday (5/6) urged President Joko Widodo to cancel the subsidy.

“Because this industry is owned by palm oil tycoons with their combined wealth at about 60 percent of the Indonesian state budget,” SPKS Chairman Mansuetus Darto said. Unlike oil palm smallholders who are now seeing their meager income further threatened by the rise of the export levy, palm oil corporation had the mean to survive the current economic hardship caused by the ongoing COVID-19 pandemic.

“Divert the funds of the BPDP-KS (Oil Palm Plantation Fund Management Agency) allotted to the biodiesel industry into direct subsidies for oil palm farmers,” said Darto who also said that drops in the price of fresh fruit bunch and increases in the prices of agricultural input such as fertilizer, was now a common occurrence across Indonesia.

The results of an SPKS research presented at the discussion by the organization’s head of advocacy Marselinus Andry, showed that the biodiesel industry had already pocketed the lion’s share, 80 percent, of the money disbursed by BPDPKS from 2015 up to and including 2019, at Rp38.7 trillion. Meanwhile funds channeled to farmers up until 2020 only reached Rp1.7 trillion, through the replanting program for people’s plantation.

“According to us as farmers, the ones who should be subsidized are the farmers, not the entrepreneurs, with up to Rp2.8 trillion including through raising the palm oil export tax,” said Tolen Kateren, Chairman of Samade, an oil palm farmer organization grouping mostly independent smallholders.

“If the B30 subsidy remains, then we ask the government to involve farmers in the biodiesel management by including the farmers in the raw material supply chain for B30, or by developing the downstream industry for farmers producing biodiesel to meet domestic demand,” he added.

Heri Susanto, Chairman of the Indonesian Sustainable Palm Oil Farmer Network (JaPSBI) said that the government should facilitate the building of mini mills for farmers so that they can not only cut down the role of brokers but also allow them access into the B30 supply chain.

Previously, Darto told the discussion that smallholders were not part of the B30 supply chain as biodiesel producers took their raw materials from their own plantations or from another company and not from smallholders.

“For the B30 and up to the B100 biodiesel program later, the biodiesel industry should purchase Fresh Fruit Bunch from farmers for their raw material, and so that this can happen, the Energy and Mineral Resources Ministry must immediately prepare the legal umbrella on this biodiesel industry,” said Gamal Nasir, who heads the POPSI Board of Patrons.

Tolen also questioned whether the biodiesel subsidy was fair, since 80 percent of the fund disbursed by BPDPKS went into the biodiesel program while the remaining 20 percent still had to be split for the Replanting Program for People’s Plantation, for facilities and infrastructure, for improving the human resources among farmers and for research and development.

“With this export levy, we as farmers are asking BPDPKS to provide this fund to farmers in proportion as smallholders’ plantation account for 41 percent of the total plantation surface in Indonesia, or 36 percent of CPO production in Indonesia,” Tolen said.

On June 1, 2020, the government raised the CPO export levy from the previous $50 per ton to $55 per ton. Participants of the discussion all said that the increase would negatively impact farmers because mills usually would dump the raise on to the farmers who were now mostly only earning below Rp1,000 for every kilogram of Fresh Fruit Bunch.

Tolen said that fund raised from the levy could be used to build facilities and infrastructure for the palm oil industry, promote and strengthen small and medium scale farmers’ enterprises, financing of farmer’s land titles and also the strengthening of farmer organizations.

Darto also criticized BPDPKS, saying that the institution was “deceiving the public” by claiming in a press release issued last month, to announce that the government, through BPDPKS had disbursed Rp2.78 trillion for the development of sustainable palm oil, to support the downstream sector of the industry, through plantation replanting programs, the provision of facilities and infrastructure and the development of human resources in the oil palm sector.

He said the press release was deceiving because the money only went to the biodiesel industry and did not reach farmers who played no part in the industry’s supply chain.

Setiyono, Chairman of the Association of Scheme Oil Palm Farmers (Aspekpir) pointed out that world crude oil prices were now much lower than CPO and therefore the government should rather rely on crude oil to meet national energy needs had temporarily halt the biodiesel program which was much costlier because of the subsidy.

He said that the BPDPKS fund for the biodiesel industry, “should rather be diverted to farmers, be that for replanting, boosting funds for facilities and infrastructure and also for training the human resources of farmers.”

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