PALMOILMAGAZINE, JAKARTA – Previously, the government believed that increasing the price of crude palm oil (CPO) could be achieved through the establishment of the CPO Supporting Fund (CSF) and its derivatives. The funds collected were intended to subsidize biodiesel production, with the expectation that higher domestic biodiesel production would absorb more CPO, thereby driving up its price.
This, in turn, was anticipated to improve the fresh fruit bunch (FFB) prices for smallholders and ultimately enhance their economic well-being.
However, Intan Elvira, a junior researcher at Yayasan Madani Berkelanjutan, argued that this theory has not materialized. The domestic CPO price has not significantly increased and remains volatile.
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For example, in 2014, before the CSF was implemented, the average CPO price in Belawan and Dumai was Rp 9,084/kg. But after the CSF was introduced, the price of CPO dropped to Rp 6,829/kg in 2019.
To make the smallholders’ FFB price better, Ministry of Agriculture needs to improve the formula to decide their FFB price, from production cost approach in the POF level to be the combination of production cost in POF level and smallholders’ level.
Ministry of Agriculture needs to design the matrix of FFB price determination based on the quality of FFB as the official reference which is published by revising Regulation of Minister of Agriculture No. 1 / 2018 about FFB Price Decision.
“It needs to arrange the special scheme by regulation of minister about linear price determination between the increasing CPO price and K index. In many cases, the increasing FFB price is not as elastic as the increasing CPO price,” she said.
Then PFMA needs to change the strategies to use CSF and focus to improve the smallholders’ welfare, such as, implementing smallholders’ replanting program, increasing the infrastructures in the plantation, increasing human resources. These are important so that the mandate of Laws No. 39 / 2014 about Plantation could be realized well.
“The regulation regulates that CSF is for smallholders’ replanting planting, increasing infrastructures in the plantations, and increasing human resources,” Trias Fetra mentioned.
Besides, PFMA should improve the scheme of CSF to smallholders’ replanting program based on the valid data (in spatial and numeric), cut off the complex bureaucracy, such as, multi-level technical recommendation and candidates to get the programs. (P2)
