JAKARTA – The oil palm smallholders play a big role in Indonesian oil palm plantations as they own around 40 percent of the total area of Indonesian oil palm plantations. Unfortunately, their production is only around 36 percent of the total national production. It is because their productivity is still much lower than those oil palm plantations owned by the private sector and state-owned plantation companies (PTPN).
Their low productivity was caused by a number of factors, which include the use of poor quality of seeds (illegitimate) and suboptimal technical culture of palm cultivation.
Apparently, the government is strongly committed to solving the issue of low productivity. It has issued policies and programs, including the Agriculture Minister Regulation No.18 of 2016) on replanting program for smallholders’ plantations (PSR). The replanting program was initially launched by President Joko Widodo (Jokowi) in three locations, namely South Sumatra, North Sumatra, and Riau provinces. It was later expected to be expanded to other provinces, where the smallholders are seen in need of such replanting implementation.
Actually, the replanting program is not just about planting new plants. It is a very important stage to improve the sustainability of the oil palm plantations as a whole. It also stands as an entry point for application of new technologies in the form of superior varieties, good agriculture practices (GAP), and improvement of governance. It shows that the replanting program is a more sustainable way to increase productivity (Sipayung, 2018; Bronkhorst et al., 2017; Varkkey et al., 2018).
Based on the sustainability principles, the oil palm replanting is also a way to expand and improve their multifunctionality, namely the economic, social, and ecological functions of oil palm plantations (PASPI Monitor, 2021y). Unlike state-owned and private plantation companies, which find no significant difficulties in practicing the replanting as part of their corporate routine activities, the smallholders have to deal with various obstacles in replanting. Their decision for replanting is influenced by many factors that include the size of their plantation areas, income/capital level, source of income during replanting process (before reaching production), and land legality (Safitri and Rosyani, 2014; Anggraeny et al., 2016).
Considering the facts, the smallholders need financial support. A study by Mariyah et al. (2018) revealed that only 46 percent of the small farmers have savings, while the remaining 54 percent do not have savings and only around 10.8 percent of them are able to finance their own replanting investments.
The availability of fund greatly affects farmers’ willingness and success in implementing replanting (Andriati, 2011; Safitri and Rosyani, 2014; Ruf and Burger, 2015; Anggraeny et al., 2016). Generally, farmers who do not have enough fund for replanting do not carry out or are late in implementing the replanting on their oil palm plantations (Thang, 2011; Hutasoit et al., 2015).
For the smallholders, the investments needed for oil palm replanting are relatively expensive. Therefore, the government’s intervention to provide financial assistances , such as the replanting fund for smallholders, is badly needed. The PSR financing policy is stipulated through the Finance Minister Regulation No.84/ 2017 on the use of oil palm replanting funds.
The oil palm plantation fund management board (BPDPKS) is assigned to manage the replanting fund, which is derived from what is called the palm oil fund collected by BPDPKS through the palm export levy. Initially, the replanting fund was set at IDR 25 million per hectare (maximum 2 hectares per farmer). But then, it was increased to IDR 30 million per hectare. In addition, PSR financing is also facilitated through the People’s Business Credit (KUR) financing scheme. The distribution of PSR funds has increased (Figure 6) from IDR 6.35 billion in 2015 to IDR 1.26 trillion in 2021. In terms of accumulation during this period, BPDPKS has distributed palm oil funds for the PSR program amounting to IDR 6.6 trillion.
