Koalisi Transisi Bersih: Palm Oil Funds Should Subsidize Smallholders, Not Corporations

Palm Oil Magazine
Doc. Sawit Fest 2021

PALMOILMAGAZINE, JAKARTA – Civil society organizations that are members of the Clean Transition Coalition (Koalisi Transisi Bersih) appreciate the Attorney General’s Office’s steps in investigating this case and ask that the handling of the alleged misappropriation of palm oil funds related to biodiesel incentives and unlawful acts in determining the market index price (HIP) of biodiesel be opened transparently to the public.

This is because the provision of biodiesel subsidies has so far only benefited a handful of large corporations in the palm oil industry and harmed palm oil farmers in Indonesia.

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The Attorney General’s Office is still investigating allegations of corruption in the management of palm oil funds at the Palm Oil Plantation Fund Management Agency (PFMA/BPDPKS) for the 2015-2022 period. Although it has been upgraded to the investigation stage since September 7, investigators have not yet named a suspect in this case.

In this case, prosecutors are also targeting corporations suspected of being involved. The AGO has so far summoned 23 witnesses for questioning, some of whom are senior officials of palm oil companies.

Also Read : PFMA : January – June 2023 CPO Fund Reached Rp 15,44 Trillion

BPDPKS was originally a public service agency formed in 2015 based on the mandate of Article 93 of Law No. 39/2014 on Plantations, to collect funds from plantation businesses. funds from plantation businesses. The institution collects funds from the receipt of palm oil export levies.

According to Presidential Regulation No. 61/2015 on the Collection and Use of Palm Oil Plantation Funds, the funds collected by BPDPKS should be used to finance smallholder oil palm replanting (PSR); oil palm plantation facilities and infrastructure; human resource development; research and development; promotion and partnerships; meeting food needs and downstream industries, as well as the provision and utilization of biofuels. However, in reality, the majority of palm oil funds are used to subsidize biodiesel and ignore other functions.

From 2015 to 2023, the use of palm oil funds managed by BPDPKS shows an unequal allocation and is fraught with indications of corruption, even though a study by the Palm Oil Farmers Union (SPKS 2023) shows that the use of palm oil funds for biodiesel subsidies contributes very little to increasing output growth for all economic sectors at 1.20%, compared to its use for palm oil plantation development at 1.32% for all economic sectors.

If these funds had been used for programs as mandated by the Plantation Law, they would have significantly contributed to the output growth of the oil palm plantation sector, reaching 32.31%.

Meanwhile, the use of funds for biodiesel subsidies was only able to increase the output growth of the palm oil sector by 3.2%. This data shows that economically, the use of palm oil plantation funds in accordance with the mandate of the Plantation Law will make a major contribution not only to aggregate output growth, but also make a major contribution to the development of the palm oil plantation sector in Indonesia.

Sawit Watch Director, Achmad Surambo said, “The allocation of palm oil funds for biodiesel subsidies has been carried out since the B20 to B35 program and these subsidies have provided huge profits for 10 groups of palm oil companies receiving subsidies during the 2019-2021 period, including Wilmar at Rp22, 56 trillion, Musim Mas Rp11.34 trillion, Royal Golden Eagle Rp6.41 trillion, Sinar Mas Rp5.53 trillion, Permata Hijau Rp5.52 trillion, Darmex Agro Rp5.4 trillion, Louis Dreyfus Rp2.9 trillion, Sungai Budi Rp2.56 trillion, Best Industry Rp2 trillion, and First Resources Rp1.9 trillion,” Surambo said.

Furthermore, Achmad Surambo said, the total CPO export levy in the 2019-2021 period reached IDR 70.99 trillion. In that period (2019-2021), the subsidy funds channeled to palm oil company groups integrated with Business Entities – Biofuels (BU-BBN) of biodiesel type amounted to IDR 68 trillion.

Also Read : CPO Reference Price Declines, Following are CPO OF and Levy Rates for the period 16 to 30 September 2023

“Wilmar is the group that benefits the most from biodiesel subsidies, receiving almost three times the amount of export levies collected by BPDP-KS. The difference between export levies and biodiesel subsidies, Wilmar earned a surplus of Rp 14.8 trillion,” Surambo added.

What is more ironic is that the surplus received by large palm oil companies such as Wilmar is not proportional to the allocation of palm oil funds for the basic needs of oil palm farmers. In the 2015-2019 period, the realization for the smallholder oil palm replanting program or PSR only amounted to Rp 2.7 trillion, human resource development amounted to Rp 140.6 billion, and procurement of facilities and infrastructure amounted to Rp1.73 billion. If the three are combined, the total does not even reach 10% of the total funds of Rp47.28 trillion raised by BPDPKS in that period.

Therefore, Satya Bumi Executive Director Andi Muttaqien said, in this case, investigators must explore the purpose of establishing the BPDPKS institution with the reality that occurred in the 2015-2022 period. “BPDPKS funds must be returned according to its khittah, namely financing more upstream for replanting, training and developing human resources, research and development that makes farmers’ productivity increase, so that farmers can upgrade and enter the commercial ecosystem in the long term,” Andi said.

Still in the momentum of the commemoration of the National Farmers’ Day which is celebrated every September 24, Andi reminded that the sovereignty of oil palm farmers will greatly determine the development of the palm oil industry and encourage national economic development.

“So the palm oil fund contribution should be a subsidy for palm oil farmers, not instead enjoyed by large corporations, export levies from companies should not return to the company,” Andi said.

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