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Green fuel program unlikely to benefit oil palm farmers
Oil palm farmers have raised doubts that the palm oil-based “green fuel” scheme laid out in the government's recent five-year plan will benefit them, taking past biodiesel developments as cautionary tales
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span>Oil palm farmers have raised doubts that the palm oil-based “green fuel” scheme laid out in the government's recent five-year plan will benefit them, taking past biodiesel developments as cautionary tales.
Palm Oil Smallholders Union (SPKS) secretary-general Mansuetus Darto said that the scheme could risk repeating mistakes of keeping farmers out of the supply chain just like previous biodiesel programs.
As an example, he said agribusiness giant Wilmar Group "did not involve" smallholders in producing its assigned 2.5 million liters of the 30-percent blended biodiesel (B30) quota. Instead, around 162 companies are supplying the crude palm oil (CPO) for the group’s B30 production.
"It will be really regrettable if we develop [...] the palm oil-based green fuel where only big corporations can benefit," said Mansuetus in Jakarta on Feb. 11, adding that farmers already struggled to make a profit amid price manipulations allegedly conducted by intermediate agents.
His skepticism about the scheme contrasts with the government's 2020-2024 National Medium-Term Development Plan (RPJMN) that states that "palm oil-based fuel production will be increased by empowering smallholders" through the production of "green fuel", also known as bio-hydrocarbon fuel.
"Because the raw materials will come from independently run farmers, this vegetable oil-based biofuel development will also support the welfare of these farmers," Indonesian Oil Palm Estate Fund (BPDP-KS) president director Dono Boestami explained. The BPDP-KS is among other government institutions that will run the new program.
Responding to the union's concerns, Indonesian Biofuel Producers Association (Aprobi) chairman Master Parulian Tumanggor said that smallholders had contributed a “large enough” portion to make palm oil-based biofuels, although the industry group faced difficulty in distinguishing farmer-grown palm oil from corporation-produced palm oil as the products are identical.
However, he noted that smallholders generally have yet to meet sustainability standards, rendering producers unable to process and export the commodity for destinations like Europe and the United States. As a result, biodiesel producers would use farmers' palm oil to fulfill domestic needs instead.
With similar principles, the Wilmar group also only buys palm oil — including to produce the would-be green fuel — from sources that are certified by the Roundtable on Sustainable Palm Oil (RSPO) or Indonesia Sustainable Palm Oil (ISPO), said Master, who is also the group's commissioner. Thus, he said the union's accusations of excluding farmers "could be true and could be not".
"Green fuel is now much in demand across the world. So independent farmers should also follow the current provision set by the government,” Master said.
In spite of its potential risks, the Executive Office of the President (KSP) undersecretary for human development, Abetnego Tarigan, said on Thursday that seeking alternative energy like the green fuel was important to fulfill the energy-related needs of an increasingly large population.
The government’s “green fuel” program is expected to help boost the share of renewable energy in the country’s energy mix to 23 percent by 2024 from 8.55 percent in 2018 and lower fossil fuel use and crude oil imports. Domestic biofuel consumption is also expected to rise to 17.4 million kiloliters by 2024 from 6.9 million kiloliters in 2020.
The program is also intended to increase the domestic consumption of CPO, which is facing growing restrictions overseas especially in Europe.
He suspects that farmers may have received little benefits from previous biofuel initiatives due to the lack of funding in the upstream industry. Echoing his argument, data compiled by the union showed that the BPDP-KS has only allocated 1.6 percent of its current Rp 47 trillion to farmers.
The BPDP-KS pools funds from CPO exporters’ export levies to cover the needs related to the palm oil industry, including to cover differences between the prices of biodiesels that were sold to state-owned oil and gas holding company Pertamina and international prices.
