PALMOILMAGAZINE, BOGOR – As we all know, the government is conducting a major clean-up of palm oil plantations within forest areas. This follows the issuance of the Ministry of Forestry’s Decree No. 36 of 2025, which regulates plantation companies operating in forest areas without forestry permits, and Presidential Regulation No. 5 of 2025 on forest area enforcement. These regulations give a key role to the Ministry of Defense, the Attorney General’s Office, and law enforcement agencies in the enforcement process.
Under these regulations, the designated institutions have the legal authority to take action. Additionally, I observe a process where AGRINAS is expected to manage these seized plantations. For example, the state-confiscated 210,000 hectares of PT Duta Palma’s plantation due to corruption, and it is now under AGRINAS management.
AGRINAS has been transformed into Indonesia’s largest state-owned palm oil enterprise, nearly matching PTPN, a state-owned plantation company that has been in operation since the 1970s. If AGRINAS takes over all 317,000 hectares of plantations designated by the Ministry of Environment and Forestry, it will become the largest state-owned palm oil company in Indonesia.
Also Read: Developing State-Owned (BUMN) Palm Oil Plantations to Support Bioenergy
Impact on Palm Oil Production
In 2024, Indonesia’s palm oil production was 52 million tons, lower than the 54 million tons recorded in 2023. Additionally, palm oil exports fell to 29 million tons in 2024 from 32 million tons in 2023.
With the current situation—military operations in plantation areas and the eventual state takeover—these 317,000 hectares, and potentially 3.4 million hectares, could become unproductive. If these plantations are not managed or are delayed in being taken over, they will deteriorate, leading to an estimated crude palm oil (CPO) production loss of 1.3 million tons. If the government aggressively seizes all 3.4 million hectares without proper planning, dialogue, or strategy (based on Articles 110A and 110B of the Omnibus Law), the national CPO production could drop by 13.6 million tons.
If production in 2024 was 48 million tons and 13.6 million tons are lost, Indonesia would only produce 35 million tons of CPO. Given the state’s track record in managing plantations—such as PTPN’s productivity challenges and corruption issues—it is uncertain whether nationalized plantations would be better managed or more productive.
Broader Implications for Indonesia
The government is pushing the biodiesel industry with the B40 program, which requires a substantial amount of palm oil—around 15 million tons. A production decline would reduce exports, decreasing the country’s foreign exchange earnings.
In 2024, palm oil exports generated $27.76 billion (approximately IDR 440 trillion) in foreign exchange revenue from 29.5 million tons of exports. If production drops as projected, foreign exchange earnings in 2025 will decline. Additionally, the government has increased export taxes and levies to nearly $230 per metric ton, further straining the industry. With state revenue already declining as of February 2025 compared to the previous year, this could significantly impact the national economy.
The government must carefully evaluate its approach. Many state-owned enterprises, particularly those managing natural resources, are facing challenges. A reckless takeover could backfire, much like eating a cake that ends up causing a stomachache.
Author: Mansuetus Darto, Palm Oil Industry Analyst
Disclaimer: This article reflects the author’s personal views and is solely their responsibility.
