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Jakarta Post

Asian Agri to involve more farmers in CPO production

  • Khoirul Amin

    The Jakarta Post

Jakarta   /   Tue, May 12, 2015   /  08:32 am
Asian Agri to involve more farmers in CPO production

Palm-oil talks: Asian Agri managing director Kelvin Tio (left to right) with RGE Indonesia chairman Joseph Oetomo and Asian Agri general manager Freddy Widjaya, speaks during a visit to The Jakarta Post'€™s office in Jakarta on Monday. JP/Jerry Adiguna

Palm oil producer Asian Agri Group plans to further promote the involvement of local farmers and the use of high-yield oil palm seeds in raising the company'€™s future crude palm oil (CPO) production, the company'€™s senior executive said.

Asian Agri managing director Kelvin Tio said in Jakarta Monday that the company had involved plasma and independent farmers in its oil palm plantations in Sumatra since it first started running plantations 27 years ago.

'€œAround 40 percent of our plantation area is now managed by plasma farmers. We want to increase it to 60 percent,'€ Kelvin said, indicating that the company had already met the government'€™s requirements for the involvement of plasma farmers.

Besides running their own plantations, Indonesia'€™s CPO producers are required to involve farmers in the production process under a plasma scheme, in which farmers receive not only financial assistance but also agricultural training. Under a ministerial regulation that came into effect on Oct. 2, 2013, palm oil companies are required to allocate at least 20 percent of their plantations to plasma smallholders.

Kelvin said the company planned to involve more independent farmers, in addition to the plasma farmers.

Asian Agri, which is part of Royal Golden Eagle (RGE) Group, currently manages a total of 160,000 hectares of oil palm plantations in Sumatra, of which 60,000 ha are run by plasma farmers. The company produces around 1 million metric tons of CPO per annum including those produced by plasma and independent farmers.

With the plasma program, farmers have been able to significantly increase their incomes, Kelvin said during a meeting with the editorial staff of The Jakarta Post.

Kelvin explained that his firm'€™s plasma smallholders were currently on course to produce between 7.5 and 8 tons of CPO per ha a year, from around 5 to 6 tons per ha, higher than the average annual production of both plasma and independent farmers, which stands at 1 to 2 tons per ha.

The company is able to increase the production rate thanks to the use of a higher yielding oil palm variety, he said. '€œWe have seen our CPO output from plasma smallholders surge by at least 50 percent during the period of 2002-2012, compared to the period of 1979-2002,'€ he said.

Asian Agri also aimed to source CPO from more independent farmers, Kelvin said.

The company has seen its CPO output increase by 4 percent as of April this year and by around 5 to 6 percent as of May, compared to its output late last year, he added.

Talking about the CPO market outlook, Kevin said the price would likely remain under pressure this year in line with the decline in global demand.

The company, which is controlled by tycoon Sukanto Tanoto, was previously obliged to pay Rp 2.5 trillion (US$190.04 million) in fines for tax evasion in 2012, based on a Supreme Court ruling.

Asian Agri general manager Freddy Widjaja said the company was now still in the process of appealing to the Tax Court.

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