Alternative Partnership for More Inclusive Palm Oil Industry
PASPI (Palm Oil Agribusiness Strategic Policy) had a guests from KPPU (Komisi Pengawas Persaingan Usaha or Business Competition Supervisory Commission) on Thursday (March 5th, 2020). One of the topics discussed at the meeting is related to the history and challenges of partnerships in the national palm oil industry.
The development of oil palm plantations in Indonesia is very unique because a plantation companies (private and state) can grow together with oil palm farmers. This condition can occur as a result of part of the partnership policy design developed by the Indonesian government since the late 1970s. Through this policy, the farmer’s have a 41 percent share of the total area of Indonesian oil palm plantations.
There are at least four patterns in the development of oil palm plantation partnerships that have already developed. The model partnership began since cooperation between large national private plantations (PBSN I,II,III) and oil palm farmers and this corporations known as the Nucleus Estate and Smallholders (PIR) program. After the successful trial of the World Bank-financed PIR program (PIR I-IV), it was further developed into various other PIR models. Special PIR and Local PIR were introduced from 1980 to 1985 in order to develop the local economies; PIR Transmigration was developed from 1986 to 1995 in line with the opening of new territory and PIR Primary Credit Cooperatives for Members were started in 1996, associated with the development of rural co-operatives. The most updated partnership pattern is the Plantation Revitalization PIR (Revitbun), but this pattern ended in 2014 because it was considered less successful (InfoSawit, 2018).
Partnership succeeded in bringing Indonesia to become the largest country in producing palm oil in the world and being the largest vegetable oil producer in the world. To continue the success of the partnership, the government from various related ministries made policies related to the company’s obligation to build oil palm farmers with minimum area: (1) 20 percent of IUP (UU No. 39/2014 about Plantation pasal 58 dan Permentan 98/2013), (2) 20 percent of HGU (Permen ATR/BPN 7/2017); dan (3) 20 percent of the released forest area (Permen LHK 51/2016).
But on the other hand, the development of partnerships has other challenges such as the limited area of new plantations and the enactment of the Moratorium Inpres (Inpres 8/2018 and Inpres 5/2019). Another challenge also comes from the consumer demand and market, namely the realization of the sustainable principles (ISPO / RSPO) in the production of palm oil that should not lead to conversion of forest land or food land, biodiversity loss, and social conflict. These factors affect companies so they cannot carry out the obligation to develop new plantations.
Partnership pattern should also be able to be a solution of the problems faced by oil palm farmers, especially smallholder (read: petani swadaya), considering the enormous amount of them. Low productivity of oil palm plantations with low quality fruit fresh bunch (high levels of Free Fatty Acids), high transportation costs due to the distance of palm oil mills, and low bargaining power in pricing become a critical problem that have a potential to reduce the welfare of smallholders.
Seeing the challenges faced by developing partnerships, PASPI suggested that there would be a conversion of partnership patterns between oil palm companies and oil palm smallholders which could also be a solution to the problems of independent smallholders. Oil palm plantation companies can facilitate the improvement of productivity and quality of FFB produced by nearby independent smallholders (petani swadaya), both through the realization of the Farmers’s Oil Palm Rejuvenation Programme (read: Peremajaan Sawit Rakyat/PSR) or technical culture from the provision of superior seeds to the implementation of Good Agricultural Practices (GAP).
Another alternative partnership that can be done by oil palm plantation companies with independent smallholder groups is by building greenfuel mills (PKS greenfuel). This PKS greenfuel can produced Industrial Palm Oil (IPO) or Industrial Palm Kernel Oil (IPKO) based on palm oil’s farmers and IPO/IPKO as raw material for green diesel, green gasoline and green avtur/jet fuel. Partnership conversion can also develop into non-palm oil businesses such as increasing local food production/smallholder agriculture that used to fulfill the needs of employees of oil palm plantations companies and public and also the development of creative industries based on secondary products of palm ol product (such as palm brown sugar, handycraft from stem of palm oil, palm sticks, etc.) and the provision of biolistric for the surrounding community from POME processing.
With the alternative partnership that PASPI tried to offer, it is hoped that it can increase the inclusiveness of the palm oil industry in providing greater economic benefits while strengthening smallholders farmer of oil palm plantation.
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