Indonesia plans to double palm oil replanting subsidy to spur participation

INDONESIA plans to double its palm oil replanting subsidy, chief economic minister Airlangga Hartarto said in a statement on Tuesday (Feb 27), to boost farmer participation in the programme.

The new subsidy will rise to 60 million rupiah (S$5,149) per hectare, Airlangga said in the statement, without giving a firm date when the higher payments will be enacted.

Indonesia in 2016 launched a subsidised replanting programme for palm oil, one of its top commodity exports, to boost yields from smallholders without clearing more land. Farmers receive subsidies to buy palm seedlings and cultivate new palm trees to replace older, less fruitful trees.

However, the take-up has been slow because of administrative hurdles and farmers’ concerns over loss of income while they wait for the trees to mature.

Airlangga said the total subsidy may reach around 10.8 trillion rupiah per year as authorities target approving 180,000 hectares (444,790 acres) of area to replant annually.

Indonesia funds the programme through levies collected from crude palm oil exports.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

Airlangga said the government will also review the requirements to join the programme.

“The Agriculture Ministry has been requested to review its ministerial regulation because the smallholders could not launch their replanting because of two requirements,” he said, referring to a landowner certificate and recommendation from the forestry ministry.

The smallholders palm oil replanting scheme initially targeted replacing around 2.5 million hectares of old trees by 2025.

Yet only 326,308 hectares had been approved by the end of 2023, and only 205,524 hectares have actually been planted. REUTERS