Impact of Palm Oil Sector Policy

Impact of Palm Oil Sector Policy

Photo by : Raisan Al Farisi / Sawitfest 2021

Palmoilmagazine, JAKARTA – Many questioned why palm cooking oil is so expensive in the late days. It is always seen and read in newspaper and tv that many people should be in line to get bulk palm cooking oil. As a matter of fact, this country is the biggest crude palm oil (CPO) producer in the world.

Like a chick is dead in a barn, this happens in palm cooking oil complicated issue that the people should face. The economic law – supply and demand – is not available for CPO production which is big in numbers and palm cooking oil procurement from CPO.

The government tried its best to publish policies to control and stabilize palm cooking oil price. But until now there is no result still, such as, publishing subsidized palm cooking oil, one price palm cooking oil, and domestic market obligation for CPO and olein to supply domestic needs.

The policy was substituted by others for not being to analyze the complex issue in the domestic. Domestic market obligation of CPO and olein, and highest retail price of bulk palm cooking oil, simple package, and premium palm cooking oil could actually made it cheaper (Kompas, 4/4/2022).

The latest policy by delivering subsidy to bulk, simple, and premium packaged palm cooking oil was in the market mechanism since 16 March 2022 but it was not enough to stabilize the stock and price. Being fail to muffle the expensive palm cooking oil, the government announced to deliver bantuan langsung tunai (BLT) to enlighten the people’s burden, Friday (1/4/2022). It was for 20,5 million poor people that got Bantuan Pangan Non Tunai and Program Keluarga Harapan and 2,5 million people of small and micro businessmen. The numbers were Rp 100 thousand and paid once for three months (April – June).

As the biggest CPO producer, Indonesia got luck for the increasing price of it by the limited stocks from other vegetable oil producers, such as, sunflower oil. The economic law – supply and demand – should actually run in the trade globally.

The war between Russia and Ukraine makes palm oil more and more expensive; crude oil gets increasing price double which was only US$ 50/barrel to be more than US$ 100/barrel. As the result, CPO in Indonesia gets increasing. With no government’s intervention, palm cooking oil price would be increasing as CPO gets increasing as the material of it.

The government intervention showed that the country exists to protect the people by publishing every policy. Unfortunately the policies published by the government were about downstream sector only, not the upstream which is the whole governance.

The policy to control palm cooking oil stock and price would be one downstream policy in a whole governance series. The too late palm oil plantation mastery which the private sectors master made the government not do much to publish policy in downstream sectors.

It is understandable if in this year, to solve palm cooking oil price and stock, the government published 11 policies though it is not rare in many markets. But still, it is expensive.

The latest, radical, and heavy policy was published by President Joko Widodo on 28 April 2022 by banning CPO and its derivative export until uncertain time. The people is the main concern rather than getting exchange for the country because many suffered for the rare and expensive palm cooking oil in the country where palm oil plantations develop and as the biggest CPO producer in the world.

The government could provide other alternative, such as, full subsidy for bulk and packaged palm cooking oil producers with no differentiation to get stable price while improving the governance from the upstream to downstream sectors.

The downstream sectors for all these years – including delivering BLT are partial and did not get the roots of the problems. Learning from Saudi Arabia as the biggest crude oil producer in the world, though it is now more than US$ 100 per barrel, it does not mean, the fuel price in the country gets increasing because the government of Saudi Arabia fully subsidized it.

If Saudi Arabia could deliver full fuel subsidy in the country, why doesn’t Indonesia deliver subsidy for its palm cooking oil price? We are the same as the biggest producers in the world, one is crude oil, and the other is crude palm oil. (*)

by: Pramono Dwi Susetyo

Once workd at Ministry of Environment and Forestry


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