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Optimization of Crude Palm Oil Fund to Support Smallholder Oil Palm Replanting in Reducing Deforestation in Indonesia

Author

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  • Fitri Nurfatriani

    (Research and Development Center of Social, Economic, Policy, and Climate Change, Ministry of Environment and Forestry Indonesia, Bogor 16118, Indonesia)

  • Ramawati

    (Research and Development Center of Social, Economic, Policy, and Climate Change, Ministry of Environment and Forestry Indonesia, Bogor 16118, Indonesia)

  • Galih Kartika Sari

    (Research and Development Center of Social, Economic, Policy, and Climate Change, Ministry of Environment and Forestry Indonesia, Bogor 16118, Indonesia)

  • Heru Komarudin

    (Center for International Forestry Research (CIFOR), Bogor 16680, Indonesia)

Abstract

Smallholders play a significant role in the Indonesian palm oil industry. They cultivate more than 40% of the total plantation area, and their production contributes to the national revenue. However, despite their significant role, smallholders continue to face crop management, financial and environmental challenges. The fact that some smallholder plantations are illegally located in state forestland poses challenges for smallholders as regards getting access to finance, improving yields, and obtaining sustainable certification. Government policy on the collection of levies from exported crude palm oil (CPO fund) and its derivative products provides smallholders the opportunity to replant and support their sustainable practices, thereby reducing deforestation. This paper discusses how fiscal incentives of the CPO fund may have been optimized to prioritize these outcomes. We should prioritize the use of the fund not only to support smallholder replanting, but also to clarify their land tenure rights, so that they could get access to sustainable certification and financial institutions. It is also recommended that funds be allocated to subsidize loan interest to the bank and build productive capital during the grace period. These efforts have to be accompanied by building and improving smallholder databases and strengthening local government.

Suggested Citation

  • Fitri Nurfatriani & Ramawati & Galih Kartika Sari & Heru Komarudin, 2019. "Optimization of Crude Palm Oil Fund to Support Smallholder Oil Palm Replanting in Reducing Deforestation in Indonesia," Sustainability, MDPI, vol. 11(18), pages 1-16, September.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:18:p:4914-:d:265439
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    References listed on IDEAS

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    Cited by:

    1. Eusebius Pantja Pramudya & Lukas Rumboko Wibowo & Fitri Nurfatriani & Iman Kasiman Nawireja & Dewi Ratna Kurniasari & Sakti Hutabarat & Yohanes Berenika Kadarusman & Ananda Oemi Iswardhani & Rukaiyah , 2022. "Incentives for Palm Oil Smallholders in Mandatory Certification in Indonesia," Land, MDPI, vol. 11(4), pages 1-28, April.
    2. Hendrawan, Dienda C P & Musshoff, Oliver, 2022. "Oil Palm Smallholder Farmers' Livelihood Resilience and Decision Making in Replanting," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322441, Agricultural and Applied Economics Association.
    3. Petri, Heinrich & Hendrawan, Dienda & Bähr, Tobias & Asnawi, Rosyani & Mußhoff, Oliver & Wollni, Meike & Faust, Heiko, 2022. "The challenges Indonesian oil palm smallholders face when replanting becomes necessary, and how they can be supported: A review," EFForTS Discussion Paper Series 36, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    4. Lim, Ya Li & Tenorio, Fatima A. & Monzon, Juan P. & Sugianto, Hendra & Donough, Christopher R. & Rahutomo, Suroso & Agus, Fahmuddin & Slingerland, Maja A. & Darlan, Nuzul H. & Dwiyahreni, Asri A. & Fa, 2023. "Too little, too imbalanced: Nutrient supply in smallholder oil palm fields in Indonesia," Agricultural Systems, Elsevier, vol. 210(C).
    5. Alina Petronela Alexoaei & Valentin Cojanu & Cristiana-Ioana Coman, 2021. "On Sustainable Consumption: The Implications of Trade in Virtual Water for the EU’s Food Security," Sustainability, MDPI, vol. 13(21), pages 1-19, October.
    6. Ahmed Zainul Abideen & Veera Pandiyan Kaliani Sundram & Shahryar Sorooshian, 2023. "Scope for Sustainable Development of Small Holder Farmers in the Palm Oil Supply Chain—A Systematic Literature Review and Thematic Scientific Mapping," Logistics, MDPI, vol. 7(1), pages 1-24, January.
    7. Zhao, Jing & Elmore, Andrew J. & Lee, Janice Ser Huay & Numata, Izaya & Zhang, Xin & Cochrane, Mark A., 2023. "Replanting and yield increase strategies for alleviating the potential decline in palm oil production in Indonesia," Agricultural Systems, Elsevier, vol. 210(C).
    8. Alexander García-Mariaca & Jorge Villalba & Uriel Carreño & Didier Aldana, 2023. "Performance and Emissions of a CI-ICE Fuelled with Jatropha Biodiesel Blends and Economic and Environment Assessment for Power Generation in Non-Interconnected Areas," Energies, MDPI, vol. 16(16), pages 1-16, August.

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