PALMOILMAGAZINE, JAKARTA – The Indonesian government has officially implemented a strategic policy to develop Bio-Solar into B40, replacing the previously planned B50 on August 18, 2024. This decision is considered safe, as it only reduces the palm oil export quota by 4 million tons, preventing any major price fluctuations in the international market.
This development comes at a critical moment, considering the significant growth in Indonesia’s palm oil plantations. From just 260,000 hectares in 1973, mostly owned by state plantations, the area now spans 16.8 million hectares in 2024. With an additional land bank of 3.2 million hectares, the total plantation area could reach 20 million hectares.
The government is committed to ensuring the availability of affordable energy, but the main challenge lies in increasing production. With the potential to develop B40 and even B100, Indonesia’s palm oil could significantly influence global market prices.
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The B40 biodiesel is characterized by an octane number of 52.8 and sulfur content of only 1,500 ppm, making it compatible with diesel engines in Europe and Japan. This is expected to drive higher biodiesel consumption in 2025 and beyond.
However, foreign company dominance in biodiesel production remains a concern. Strategic efforts are needed to encourage more significant participation from domestic companies.
Currently, Indonesia’s palm oil productivity is only 35-36% of its full potential. With normal rainfall in 2025, production is expected to increase by 2 million tons to reach 57 million tons. Nonetheless, technical improvements and government incentives are necessary to push productivity higher.
Fertilizer Subsidy Impact
Increasing palm oil fertilizer subsidies could be a strategic move. Assuming 11 million tons of subsidized fertilizer, Indonesia’s palm oil productivity could rise to 65-70 million tons. These subsidies would not only boost production but also generate substantial government revenue through export duties and levies.
For instance, with palm oil exports of 25 million tons, the export tax revenue could reach IDR 78 trillion. If exports hit 59 million tons, the revenue would soar to IDR 181 trillion. Therefore, fertilizer subsidies should be seen as an investment rather than a burden, yielding significant returns for the country.
This policy also brings positive effects for around 13.5 million smallholder farmers. However, smallholders are currently subsidizing Bio-Solar users, a condition that needs addressing. Measures such as increasing fertilizer subsidies, simplifying replanting procedures, and supporting agronomic technical improvements could enhance farmers’ welfare.
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According to the Minister of Agriculture, the development of B50 biodiesel and beyond must align with the availability of raw materials and programs that benefit growers. Palm oil replanting, infrastructure improvement, and strengthening human resources for farmers are top priorities.
Currently, palm oil plantation ownership is dominated by large private plantations (55.8%) and smallholders (40.34%), while state plantations account for just 3.84%. To enhance the role of State-Owned Enterprises (BUMN), the government could allocate problematic or saleable palm oil land to BUMNs, increasing their contribution to 10%.
With a 20 million-hectare palm oil land base, Indonesia has the potential to produce 100 million tons of palm oil annually. If serious intensification efforts are implemented, production could even exceed this figure.
The development of B40 biodiesel brings great hope for the national palm oil industry. With proper management, Indonesia can not only meet its domestic energy needs but also dominate the global market.
This policy is expected to drive the sustainability of the palm oil industry, improve farmer welfare, and solidify Indonesia’s position as the world’s largest palm oil producer. Through cooperation among the government, industry players, and society, national energy independence is not just a dream but a reality that can be achieved.
(*) Author: Memet Hakim / Lecturer at Padjadjaran University / Advisory Board Member of Indonesian Professional Alliance & APP-TNI