February 3, 2025
JAKARTA – The government is tightening regulations on right-to-cultivate (HGU) permits for oil palm plantations, requiring applicants to allocate 20 percent of their land to local smallholders before their permits get extended, a requirement which previously could be fulfilled afterward.
Authorities are also enforcing stricter oversight in selecting smallholders to manage these allocated areas. Agrarian and Spatial Planning Minister Nusron Wahid noted that many plantation firms have handed over the land to cooperatives controlled by their own employees, effectively keeping the land within corporate hands.
“This is unsatisfactory because, at the end of the day, these employees still work for the company, rather than being independent farmers,” Nusron said during a meeting with the House of Representatives Commission II, which oversees home and land affairs, on Thursday. “We want these areas to be truly managed by local smallholders.”
Oil palm plantations can apply for HGU permits for an initial 35-year concession then extend it for another 25 years.
Plantations can apply for an additional 35 year extension, but would be required to allocate 30 percent of their land to local smallholders, up from the previous 20 percent. Nusron stated that this adjustment would allow more local farmers to benefit from managing oil palm plantations.
“Businesspeople holding HGU permits might not be happy with this regulation. But without it, 16 million hectares of existing oil palm plantations would remain dominated by those groups of companies,” he said.
Beyond just managing their own plots, Nusron also envisioned those smallholders becoming integrated into the broader supply chain of the plantations, such as taking part in logistics or fertilizer procurement.
Read also: Prabowo wants more palm oil plantations, says not to fear deforestation
Big private entities controlled over 54 percent of oil palm plantations across the archipelago, followed by smallholders at over 42 percent, according to Statistics Indonesia data in 2023. The rest was owned by state-owned enterprises.
President Prabowo Subianto has said that Indonesia should expand its oil palm plantations, emphasizing the commodity’s critical role in global markets and claiming that many countries were concerned about losing access to it.
Beyond its use in food and the cosmetics industry, palm oil also serves as a key raw material for biodiesel.
The government has been steadily increasing the mandatory mix of palm oil-based fatty acid methyl ester (FAME) in biodiesel fuel, raising the share to 35 percent in February 2023 from 30 percent in 2020, earning the product its nickname of B35.
Starting this January, the government has mandated a 40 percent share of palm-oil based FAME in biodiesel and aims to increase the share further to 50 percent next year.
Read also: RI palm oil exports to fall in 2024 on rising demand, lower output
Prabowo went further in December last year, asserting that Indonesia should not be deterred by international concerns over deforestation when expanding its oil palm plantations.
Many have said his call for expansion may relate to his ambition to increase biodiesel supply and adoption, which would play a major role in pursuing energy self-sufficiency.
Environmental groups have raised concerns over the call to allow oil palm expansion, as well as over statements that undermine the risks posed by deforestation practices.