The Palm Scribe

Misplaced Priority on the Use of Palm Oil Funds

JAKARTA – The Government’s instruction to The Indonesian Oil Palm Estate Fund (BPDP-KS) to distribute Rp7,5 trillion of palm oil funds to the Wilmar Group, the Darmex Agro Group, Musim Mas, First Resources, and Louis Dreyfus Company in 2017 has hurt the interest of palm oil small farmers, said Sawit Watch, a palm oil activist group.


“The regulation is not balanced, it should provide more to small farmers who need the funds most to develop their plantations.” Said Rambo, a member of Sawit Watch. He said the decision is not in the line with plantation Law number 39 of 2014 that supports the development of local farmers, especially those who do not meet the production with optimal quality and quantity.

BPDP-KS, formed by Regulation of the Minister of Finance of the Republic of Indonesia number 113/PMK.01/2015 with the task of arranging and distributing funds, collected from export levies of palm oil products, for the development of Indonesia’s palm oil industry.

BPDP-KS chairman Dono Boestami, however, said that the decision to distribute the funds to palm oil corporations is beyond his pay grade. “I need to emphasize the purpose of BPDP-KS is to manage the funds, not to regulator the industry! “Boestami said when contacted by The Palm Scribe.

The government has actually assisted small farmers by allocating  Rp25 million per hectare for replanting, but this number is widely considered to be inadequate because the cost required to rejuvenate oil palm plantations is around Rp60 million per hectare.

Boestami said that BPDP-KS is instructed in its work by several ministries such as Ministry of Finance and Ministry of Agriculture. “It was the Ministry of Agriculture that decided on allocating Rp25 million per hectare per farmer. When we asked why the funds were so small, they couldn’t answer.” Said Boestami.

Similarly, it was the Ministry of Finance that mandated the size of the funds that BPDP-KS should pay out to the corporations. It was apparently based on the largest palm oil production in Indonesia.

Boestami argued the amount of people who don’t know the distribution process of funds which managed by BPDP-KS is still high, hence this institution often blamed for the palm oil funds issue.

A research conducted by Corruption Eradication Commission (KPK) cited by BBC in January mentioned that there are 11 companies that received the subsidy funds related to its biofuel program in between August 2015 and April 2016.

The list of companies are PT Wilmar Bionergi Indonesia, PT Wilmar Nabati Indonesia, Season Mas Group, PT Eterindo Wahanatama, PT Anugerahinti Gemanusa, PT Darmex Biofuels, PT Pelita Agung Agrindustri, PT Primanusa Palma Energy, PT Ciliandra Perkasa, PT Cemerlang Energi Perkasa; PT Energi Baharu Lestar. Those are suppliers of palm oil for biofuel program.

Rambo said that if BPDP-KS is not the authority to determine the distribution of palm oil funds, then the clear legal standing and mechanism are needed. “If there is such regulation problem, it should be quickly resolved and simple, don’t make it difficult for farmers!” Said Rambo.




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