The Use of Palm Oil Funds for Biodiesel Subsidies is Assessed as Not Providing Benefits
Liputan6.com, Jakarta – In the last five years, the productivity of Indonesian palm oil has been almost twice that of Malaysia. Head of the Ministry of Finance’s National Budget Policy Center, Ubaidi Socheh Hamidi said that this happened because there were many immature oil palm lands, the maintenance and use of fertilizers were not optimal and the government’s support for plasma farmers was not as good as in Malaysia.
“There are several challenges in the upstream sector, namely limited land and a moratorium on land expansion, the welfare of independent smallholders, including issues of land disputes, deforestation and land degradation. These are challenges that have to be mitigated, especially in policy making,” said Ubaidi in a Katadata Virtual Forum Series discussion with the theme of the Economic Impact of Palm Oil for Regions, Thursday (28/1/2021).
He added, to overcome the challenges faced in the upstream palm oil sector, the government has prepared a program for the Palm Oil Plantation Fund Management Agency (BPDPKS). The BPDPKS program includes human resource development, research and development, downstreaming of the oil palm plantation industry and the provision and utilization of biofuels.
According to Ubaidi, the program is expected to be able to improve the performance of the Indonesian palm oil sector, create a domestic market, absorb excess CPO in the market in order to stabilize prices and improve farmers’ welfare.
Program Officer Center for Sustainable Palm Oil Governance, Trias Fetra said, the use of oil palm plantation funds has not provided welfare for oil palm farmers.
He said, of the Rp 11 trillion in palm oil funds, about 80 percent was used for biodiesel subsidies. The goal, said Trias, is for biodiesel production to increase so that it can absorb CPO production so that it can boost CPO prices and other implications of increasing the price of palm fresh fruit bunches.
“However, based on the results of the input-output analysis, the use of palm oil funds for biodiesel subsidies does not provide a great benefit to the balance of production factors compared to using it for programs that are directly related to oil palm plantations,” he explained.
Trias added that the policy of using palm oil funds for biodiesel subsidies has failed. This is because the exchange rate of smallholder plantations has not increased except in 2017. In fact, if the funds are fully used for palm oil, there will be an increase in output growth in the oil palm production sector by around 6.52 percent.
Trias also revealed the lack of local budget allocations for oil palm farmers. Based on data in 2020, Riau province allocated 66 percent of the budget at the Plantation Service, which was not specifically used for direct allocations to improve the welfare of oil palm farmers. In fact, Riau is the province with the largest oil palm cover in Indonesia.
“The condition of our oil palm farmers is still far from prosperous. In this industrial trade system, oil palm farmers are still castrated, oil palm funds that should be co-opted by corporations and oil palm farmers have not become a priority regarding regional budgets,” he explained.