The government is positioning plantation cooperatives as strategic partners in managing palm oil plantations and developing processing facilities, with Agrinas Palma Nusantara preparing to involve cooperatives around managed plantation areas.
PALMOILMAGAZINE, MUSI BANYUASIN — The Indonesian government is encouraging plantation cooperatives to play a larger role in the palm oil downstream industry, moving beyond plantation management to ownership and operation of crude palm oil (CPO) processing facilities.
The initiative is expected to strengthen smallholders’ bargaining power while retaining more palm oil value within producing regions. The government is also looking to build stronger links between smallholders, cooperatives, plantations, processing facilities, financing and markets.
According to Indonesia’s Ministry of Cooperatives, the country currently has 2,587 cooperatives operating in the plantation sector. Cooperatives are considered an important institutional foundation for expanding cooperative-based palm oil downstreaming.
Cooperatives Minister Ferry Juliantono said the development of the model would require collaboration among various stakeholders, including PT Agrinas Palma Nusantara (Persero), which has been mandated by the government to manage palm oil plantations resulting from enforcement against illegal cultivation in forest areas by the Forest Area Enforcement Task Force (Satgas PKH).
“The President wants the management of these plantations to involve local communities and cooperative members who are palm oil smallholders,” Ferry said during the National Seminar on “Optimizing and Downstreaming Cooperative-Based Palm Oil” at the Musi Banyuasin Regent’s Office on Tuesday (August 11, 2026).
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Ferry said active cooperatives located around palm oil plantation areas should be encouraged to move further into the supply chain. One option is for cooperatives to establish their own CPO mills, allowing them to move beyond selling fresh fruit bunches (FFB) and participate directly in processing.
He said cooperative-owned CPO mills could eventually support the supply of cooking oil and other downstream palm oil products, allowing cooperatives to capture a larger share of the value generated from the commodity.
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Two Models for Cooperative-Based Downstreaming
Ferry outlined two approaches to developing cooperative-based palm oil downstream businesses.
The first is to strengthen existing cooperatives that already have operational businesses. The second involves consolidating primary cooperatives through larger-scale business entities.
Such consolidation is considered important for achieving economies of scale and strengthening cooperatives’ capacity to manage FFB supply, financing, processing and product marketing.
Financing will also be critical to accelerating cooperatives’ entry into the downstream sector. Plantation cooperatives with established businesses can access financing facilities provided by the Revolving Fund Management Institution for Cooperatives (LPDB Koperasi).
One example is Koperasi Mandiri Makmur, which has secured LPDB Koperasi financing to construct a CPO mill. Construction of the facility is currently around 45% complete.
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Agrinas Palma Opens Partnership Opportunities
Meanwhile, PT Agrinas Palma Nusantara (Persero) President Director Mohammad Abdul Ghani said the company received its mandate under Presidential Regulation No. 5/2025 to manage palm oil plantations resulting from enforcement against illegal cultivation in forest areas.
He said these plantation areas must be managed through an approach that generates tangible benefits for surrounding communities. Cooperatives are considered one of the key institutional partners that can participate in managing and developing the areas.
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Agrinas Palma is also required to allocate at least 20% of the plantation area entrusted to the company for smallholder plasma schemes. To fulfill this requirement, the company plans to work with cooperatives.
“We will prioritize cooperatives around the plantation areas as vendors for plant maintenance, harvesting and other activities. Given the size of the areas we manage, cooperatives will be key partners in supporting palm oil downstreaming as well as food security,” Abdul Ghani said.
The partnership model could provide cooperatives with a broader role across the plantation value chain, from plantation maintenance and harvesting to processing and potentially downstream product development.
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Panel Barus, Deputy for Cooperative Business Development at the Ministry of Cooperatives, said cooperatives have opportunities to expand from upstream plantation activities into downstream processing.
Under the model, cooperatives would not merely manage plantations but could also become owners and operators of CPO processing facilities.
Greater cooperative participation across the palm oil value chain is expected to increase the economic benefits received by smallholders and communities in producing areas.
Musi Banyuasin Regent Toha Tohet said KUD Sejahtera could serve as a model for other cooperatives in the region. He encouraged more palm oil smallholders to join cooperatives to strengthen the scale and economic capacity of their businesses.
The cooperative-based downstreaming model therefore goes beyond processing palm oil. The government is seeking to establish an integrated value chain linking smallholders, cooperatives, plantation assets, processing facilities, financing and markets.
For Agrinas Palma, greater cooperative participation could become an important mechanism for translating plantation management into broader economic benefits for surrounding communities while supporting the development of a more integrated and competitive palm oil industry. (P2)
