A number of government officials and business players have constantly voiced during the last few weeks the importance of accelerating the implementation of replanting program for oil palm smallholders’ aging plantations. They all agree the replanting will not only solve the national problems, but also global issues ranging from supply shortage to meet rising demand to the sustainability and green expectations as demanded through the European Union Deforestation-Free Regulation (EUDR).
Based on data from the agriculture ministry, Indonesia has a total oil plantation areas at 16.38 million hectares (Ha), of which 53% or around 8.64 million Ha owned by private plantation companies, 42% or around 6.94 million Ha owned by smallholders, and 5% or around 800,000 Ha by state-owned oil palm plantation companies (PTPN).
Despite operating 42% or 6.94 million Ha, the smallholders’ productivity is much lower than those of the private and state-owned companies. Most of their plantations are aging and are not well cultivated.
The Association of Indonesian Oil Palm Smallholders’ (APKASINDO) Advisory Council Chairman Moeldoko said that the replanting program is needed to raise the productivity of smallholders. Currently, the productivity of smallholders is low, ranging from 2.8 – 3.4 tons of Crude Palm Oil (CPO) per hectare per year, as compared to the private companies’ productivity at 4.2-4.5 tons per hectare per year.
“By implementing the replanting in smallholders’ plantations we increase their productivity, sustainability and efficiency,” Moeldoko said during the CNBC Indonesia Special Dialogue on ‘Planning the Future of Indonesian Palm Oil Industry’ in Jakarta, on Thursday, 16 November 2023.
Economic Coordinating Minister Airlangga Hartarto said that Indonesia needs to increase its palm oil production, which was seen stagnant during the last few years. “One way to increase our palm oil production is by accelerating the implementation of replanting program for smallholders’ plantations,” he told the participants of the Indonesian Palm Oil Conference 2023 in Nusa Dua, recently.
According to the minister, the demand for vegetable oils has been continually rising nationally and globally due to global population growth and the production increase of biofuel. “In 2050, the world will need an additional supply of 200 million tons of vegetable oils to fulfill the rising global demand as global population will reach 9.8 billion people.
The US Department of Agriculture (USDA) reportedly in July this year that 2023/24 global demand of vegetable oils will reach 217.9 million tons. It stated that in terms of manufacture and consumption, palm oil remains the world’s most important vegetable oil – with global output estimated at 79.3 million tons. Indonesia remained the world’s largest producer with an output of 47 million tons, followed by Malaysia with 19 million tons and Thailand with around 3.5 million tons. Smallholders in both Malaysia and Thailand also play a significant role in producing the palm oil.
Yudo Dwiananda Priaadi, New and Renewable Energy and Energy Conservation (EBTKE) Director General at the ministry of energy and mineral resources (MEMR), said that to support the implementation of the biodiesel program Indonesia will need more supply of palm oil as the feedstock for production of the biofuel and bioavture. “As a mandatory program, as of September 2023 the B35 production had reached 8.9 million kiloliters. It is projected to reach 13.15 million kiloliters in 2023 and 13.9 million kiloliters in 2025,” said Yudo during the IPOC 2023.
Besides biodiesel, Yudo said that Indonesia is also developing bioethanol, biogasoline and bioavture by using palm oil as feedstock.
The International Energy Agency (IEA) has projected that the global demand for biofuels has been growing rapidly. It predicted that during the period of 2021 – 2026 biofuel production will rise by 28% or around 41 billion litres. The increase is driven by a combination factors of carbon reduction, energy security, and attractive alternative for countries reliant on the geopolitical uncertainty of their oil and gas supply, as seen in Europe after the Russian invasion of Ukraine.
The Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono underlined the importance of accelerating the implementation of the replanting program when addressing the 6th Borneo Forum on 14 – 15 November 2023 in Tarakan, North Kalimantan province. “Although we’re the world’s largest producer of palm oil, we’re also one of the world’s major consumers of palm oil with domestic demand continually rising. Currently, our production is stagnant and tends to decline. But our local consumption has been steadily increasing from year to year. Due to the rising local consumption our exports have decreased from the previous 70% of our total production to only 40% now,” he said.
Based on data from the government, Indonesia’s total production of CPO and PKO in 2022 was around 51 million tons, while local need was around 24 – 25 million tons and estimated to rise due to the government’s mandatory program of biodiesel 35 percent or B35.
“To raise the production, we need to accelerate replanting of smallholdings. The replanting program needs a collaboration of all stakeholders. If there is no increase in production, then export will have to be further reduced to fulfil the rising local need,” Eddy said.
The Oil Palm Plantation Fund Management Board (BPDPKS) Chairman Eddy Abdurrachman said that the government has implemented the replanting program since 2016. Initially, it was slow in its implementation. But it has seen a significant growth during the last few years.
“During the last few years we’ve distributed a total fund of Rp8.5 trillion to 134,000 smallholders to replant more than 306,000 Ha. The smallholders are given a financial assistance of Rp30 million per hectare in implementing the replanting program. This program will have the smallholders in raising their productivity and in complying with the sustainability principles,” he said during the 19th Indonesia Palm Oil Conference and 2024 Price Outlook (IPOC) in Bali, recently.
Eddy Abdurrahman pointed out that there are a number of challenges facing the government and smallholders in implementing the replanting program. The problems are related with legal documents that should be fulfilled by smallholders, while many of them found it difficult to comply. Many of them are also reluctant to do replanting due to financial gap that they will be facing in three years from planting to production period.
Other national challenges are concerned with the need for revitalization of infrastructure, fluctuations of fertilizer and pesticide prices, shortage of quality seedlings, lack of knowledge of agricultural good practices. In addition to that, the smallholders are now also facing the global challenges to comply with the requirements set by the EUDR, which is expected to be implemented in December 2024.
Eddy Abdurrahman said that a number of strategies and innovations have been implemented to tackle the challenges and to accelerate the implementation of the replanting. The government has intensified cooperation with related stakeholders, integrate the related programs with the replanting program, improve supporting infrastructure and facilitate the process of verification.
“All of the steps taken are aimed to simplify the procedures for smallholders to join the replanting program and by doing so we accelerate the replanting program implementation. It’s very important, as it will help us in increasing the productivity, sustainability, and efficiency of our smallholders,” he said. Benget Besalicto ST
