Palm oil companies are currently under scrutiny from Indonesia’s independent business watchdog for their lack of commitment to comply with the partnership regulation that requires them to allocate 20 percent of their plantation area to plasma farmers.

This partnership was enforced 12 years ago under Agriculture Ministerial Regulation No. 26/2007 on the guidelines for plantation business licensing, but farmer associations and environmental groups say the regulation has not been fully enforced.

Business Competition Supervisory Commission (KPPU) commissioner Guntur Saragih said at a press conference on Tuesday that it was investigating violations of the regulation by large palm oil plantations.

“We are not talking about a monopoly or unhealthy business practices, our focus in this matter is on how the government can ensure fair welfare distribution in the palm oil sector by allocating 20 percent of the land to communities,” he added.

Based on Article 15 of Agriculture Ministerial Regulation No. 98/2013 on the guidelines for the issuance of permits for plantation companies, which is a revision of Agriculture Ministerial Regulation No. 26/2007, any plantation company that applies for a land permit starting at 250 hectares should allocate at least 20 percent of its plantation area to plasma farmers.

Guntur said the legal basis for the business watchdog’s investigation is Law No. 20/2008 on small and medium enterprises (SMEs) and Government Regulation No. 17/2013 on SMEs as the guidelines for the implementation of the 2008 law on SMEs.

The regulations, he said, gave the KPPU the right to investigate whether or not a palm oil plantation had complied with the requirement to allocate 20 percent of its plantation area to plasma farmers. If found guilty, the KPPU has the authority to request that permit issuers, either local administrations or the Agriculture Ministry, should be sanctioned through warnings or permit revocations.

“Smallholders or plasma farmers have the right to cultivate 20 percent of the areas awarded to plantation companies. If a palm oil plantation company fails to do so, it could face the heaviest sanction of having to close down,” he said.

However, Guntur added that the KPPU would conduct the investigation based on recommendations from the ministry. “We will not investigate the whole industry, but we will probe it case by case or look at companies where there is evidence of wrongdoing.”

When asked about the existence of data about the recipients of the 20 percent policy, the ministry’s director general for plantations, Kasdi Subagyono, said it had the data, but he did not provide any names.

Previously, during the Focus Group Discussion about the partnership in the palm oil industry, which was organized by the KPPU, the ministry’s head of section for sustainable plantations, Prasetyo Jati, said not all plantation companies reported their 20 percent policy to the ministry.

“Some of the data [of the holders of 20 percent community plantations] are held by provincial or regency administrations. However, not all of them report it to us,” he added.

The deputy director of environmental group Sawit Watch, Achmad Surambo, said there were more than 200 palm oil companies in Central Kalimantan that did not have land cultivation rights (HGUs), which subsequently exempted them from the 20 percent land allocation policy.

He appreciated the KPPU’s aim to probe the partnership program and expected that by year-end there would be an official list of entities or communities that hold 20 percent of the land area.

Indonesia is estimated to have around 14 million ha of land for palm oil plantations and more than 40 percent or around 5.6 million ha of plantations are owned by smallholders.