Palm Oil FFB Pricing in Riau Protects Smallholders, and Encourages Partnerships

Palm Oil Magazine
Doc. Sawit Fest 2021 / Muh. Reski Sesar

PALMOILMAGAZINE, PEKANBARU – Riau, Indonesia’s largest palm oil hub, has taken proactive measures to protect smallholders and its people by establishing pricing policies for fresh fruit bunches (FFB). Previously, Riau only set a single FFB price for plasma smallholders.

However, at the beginning of this year, the policy was expanded to include two distinct prices—one for plasma smallholders and another for independent smallholders.

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Defris Hatmajaya, the Head of Marketing and Processing at the Plantation Agency in Riau Province, highlighted the significant impact of this pricing decision. It provides smallholders with a much-needed guarantee.

Also Read : The Smallholders Fates are In EUDR

Before the introduction of the dual pricing system, there was a price disparity of approximately 500 to 700 rupiah per kilogram between the two categories of smallholders. Defris also noted that the FFB pricing policy in Riau includes consideration of shell prices.

Many smallholders were frustrated because they did not get good price from the official decision. Though FFB that Plantation Agency of Riau Province decided up to Rp 2.500 per kilogram, the smallholders got less than Rp 2.000 per kilogram. To solve this, the provincial government encouraged partnership. They also monitored the people’s complaint about FFB price.

Defris Hatmajaya also emphasized, it is important for the smallholders to get partnership with the company (ies), namely mills that have not palm oil plantations. In the cooperation, the company (ies) are obliged to get 80% of material from smallholders.

“If the company breaks it, they would get sanctions and their permits would get revoked,” Defris said in an event in Riau Palmoilmagazine.com recently attended.

The regulation is the good progress to protect smallholders and the people while encouraging fair partnership between the smallholders and palm oil companies. By deciding the fair price and having strong partnership, Riau hoped to create sustainable environment for the sustainability of palm oil industries and the people themselves. (T2)

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