PALMOILMAGAZINE, JAKARTA – Initially, palm oil was primarily used for cooking oil (food consumption). However, today it can be processed into numerous oleochemical products and biofuels (BBN), including biodiesel and biogasoline (palm-based gasoline, aviation fuel, and gas). With Indonesia’s total biofuel demand reaching 130 million tons per year, strengthening palm oil production is a viable alternative to reduce reliance on fossil fuels. While other biofuel sources exist, they are often less efficient.
In 2023, Indonesia’s oil palm plantation area reached 16.8 million hectares (ha), divided into smallholder plantations (6.3 million ha), private estates (8.4 million ha), and state-owned plantations (only 0.56 million ha). Given its strategic importance, palm oil plantations should not be dominated by private enterprises. The government should halt new private plantation permits and instead expand state-owned plantations (PBN).
State-Owned Plantations: The Most Productive Sector
Data shows that state-owned plantations achieve the highest productivity levels, at 51.3% of their potential, compared to private estates (43.04%) and smallholders (31.99%). The significant productivity gap—19% between PBN and private estates (PBS), and 60% between PBN and smallholders—is largely due to fertilization and plantation management issues.
Despite technological advancements in palm oil biofuel processing, a major challenge remains: securing sufficient palm oil supply. Domestic consumption currently stands at 25 million tons, export demand at 25 million tons, while production remains at 50 million tons.
Bridging the Biofuel Supply Gap
In 2025, total fuel demand is projected to reach 130 million tons. If all fossil fuel were replaced with biofuels, Indonesia would need at least 155 million tons of palm oil (including 25 million tons for exports). However, current production is only 50 million tons, leaving a shortfall of 105 million tons. To meet this demand, Indonesia must boost national palm oil production to at least 160 million tons per year.
Optimized plantation management could increase production to 100 million tons. The remaining 50 million tons could be achieved by developing new plantations covering 11 million ha. Available land includes:
- 3.5 million ha of unused oil palm concession areas (European Forest Institute, 2024)
- 20.5 million ha of idle land (Kompas.com, 13/05/2024)
- 20 million ha of convertible forest land (Kompas.tv, 03.01.2025)
Overcoming Bureaucratic Challenges
Boosting national palm oil production is complicated by the involvement of eight key institutions:
- Ministry of Agriculture
- Ministry of Industry
- Ministry of Trade
- PT Pertamina
- Palm Oil Fund Management Agency (BPDPKS)
- Ministry of Agrarian Affairs and Spatial Planning (ATR)
- Regional Governments (Pemda)
- Banking Sector
Effective coordination is essential, or a dedicated agency should be established to unify these institutions under a single directive. Indonesia must seize control of the global palm oil industry and halt low-quality fossil fuel imports.
Long-Term Strategies for Sustainable Expansion
A long-term roadmap is necessary, including:
- Increasing National Palm Oil Production from 50 million tons to 100 million, then 150 million tons, through:
- Subsidized fertilizers, increasing supply from 1 kg/tree/year to 8 kg/tree/year to boost yields.
- Production Force Management techniques, which could raise productivity by 60–100%.
- Drainage control for 5–10% of plantations to improve water management.
- Upgrading transportation networks to ensure timely delivery of fresh fruit bunches (FFB) to processing mills.
- Strengthening State-Owned Plantations (PTPN) to manage at least 51% of the national palm oil estate, ensuring:
- Expansion from the current 3.5% to at least 11 million ha.
- Development of 11–12 new PTPN units, each managing 1 million ha.
- Higher productivity levels, outperforming private estates by 11% and smallholders by 19%.
- Better human resources, supported by dedicated training and research institutions.
- Increased state revenue through higher tax contributions and annual dividends.
- Establishing a State-Owned Biofuel Processing Company to manage biodiesel, bio-avtur, and bio-gasoline production. Given the strategic nature of biofuels, relying solely on private entities would be risky.
Economic and Social Impacts
Providing subsidized fertilizers would increase yields, boost farmer incomes, and generate higher tax revenue—double the subsidy cost. Additionally, higher farmer earnings would stimulate local economies, create jobs, and reduce poverty.
Expanding State-Owned Plantations
PTPN expansion can be achieved by:
- Acquiring abandoned private plantations.
- Taking over debt-ridden plantations facing foreclosure.
- Developing new plantations on idle or abandoned land.
- Converting eligible forest land into plantations.
Currently, 10 of 14 PTPN units manage palm oil plantations across Java, Sumatra, Kalimantan, and Sulawesi. Expansion is most viable in Sumatra, Kalimantan, Sulawesi, and Papua. Increasing the number of PTPN units from 9 to 18 would ensure greater state control over this strategic commodity.
Planned Expansion Over 10 Years
- Sumatra: 5 million ha expansion across six provinces (excluding Lampung due to climate constraints).
- Kalimantan: 3 new PTPN units for a 3 million ha expansion.
- Sulawesi: 4 new PTPN units managing 3 million ha.
- Maluku: 1 new PTPN unit managing 500,000 ha.
- Papua: 3 new PTPN units for a 3 million ha expansion.
Phased Growth Targets
- Phase 1 (First 5 Years): Cover 52 million tons of subsidized biofuel demand.
- Phase 2 (Next 5 Years): Fulfill 130 million tons of total biofuel demand (subsidized + non-subsidized).
Conclusion
The discovery of palm-based biodiesel, bio-avtur, bio-gasoline, and bio-bensa is a significant breakthrough. However, vested interests in fossil fuel imports may resist this shift. The government must anticipate challenges and safeguard national energy security.
By developing state-owned plantations, Indonesia can dominate the global palm oil industry, achieve biofuel self-sufficiency, and eliminate fossil fuel imports.
Author: Memet Hakim
Senior Palm Oil Agronomist, Founder of Production Force Management, Advisory Board Member at APIB & APP TNI
Disclaimer: This article reflects the author’s personal views and is not affiliated with Palmoilmagazine.com.
