INVESTIGATION
April 12, 2022
Oil Palm Fund for Cronies
Since its establishment in the middle of 2015, the posture of the Oil Palm Plantation Fund Management Agency (BPDPKS) has been strange. Accommodating complaints from oil palm billionaires following the collapse of crude palm oil (CPO) price, the state took affirmative action by providing them a market. To give the impression of doing a good deed, the aim of the BPDPKS establishment was combined with other noble programs, namely reducing the carbon emissions that have triggered the climate crisis, and also protecting oil palm farmers.
At the Paris climate conference at the end of 2015, Indonesia announced a proposal to reduce greenhouse gas emissions by 29 to 41 percent from the predicted 2.87 billion carbon dioxide (CO2) equivalent tons by 2030. This then gave rise to biodiesel, a mix of palm oil and diesel fuel. Since it is originated from plants, emissions are indeed less than those of diesel, which is extracted from the earth.
Perhaps the government did not consider that biodiesel also emits greenhouse gases. The reduction in emissions from biodiesel is too small when compared to the increased emissions from the loss of forest cover caused by its conversion into plantations. A study conducted by David Gaveau reported in the journal PLOS One at the end of March showed that there was a correlation between the increase in the price of CPO and the expansion of oil palm plantations in Indonesia from 2001 to 2019.
What is more, the proportion of palm oil in the biodiesel blend has consistently risen. From B5, B20 and now B30, there are now reports said this would become B40—or containing 40 percent palm oil—in order to absorb excess palm oil production as well as to reduce emissions. Indonesia has already surpassed Malaysia in the production of oil palm. Oil palm plantations now cover 16.8 million hectares, the largest in the world.
The problem is that biodiesel as a national program will be under threat if the price of CPO continues to increase in the global market as it is at present. Palm oil companies prefer to export it rather than meeting the demand for local supplies. This is why cooking oil is in short supply and why the price has soared. In order to break this market cycle, the BPDPKS is to offer subsidies so that companies are willing to provide supply for biodiesel production.
The money will come from a levy on every ton of CPO exported. Because this is a levy, not tax, hundreds of trillions of rupiah will not be paid into state coffers. And the issue of biodiesel subsidies is now complicated. Subsidies go to the large suppliers that are none other than the palm oil tycoons. The protection of farmers is ignored. Even this process is dubious because in determining the subsidies, the BPDPKS steering committee that is headed by the coordinating minister for the economy involves many palm oil entrepreneurs.
We try to map out these conflicts of interest in this edition. As well as the findings of Tempo, the Corruption Eradication Commission (KPK) and the Supreme Audit Agency (BPK) have also indicated potential state loss to the tune of trillions of rupiah. This means corruption.
This week’s investigative coverage is part of a series on the deforestation of tropical forests in collaboration with 19 media in Asia, the Amazon and the Congo, supported by the Rainforest Investigations Network Pulitzer Center. The report on the palm oil fund is prepared in cooperation with Jikalahari, Greenpeace Indonesia and the Auriga Nusantara Foundation. Enjoy the magazine.
Bagja Hidayat
Executive Editor
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Oil Palm Funds: Cronies, Emissions, Deforestation
How is it that oil palm tycoons are receiving the largest portion of biodiesel subsidies?
The History of the BPDPKS
Another look at why the government came up with the idea of establishing the BPDPKS, which now manages funds totaling almost Rp140 trillion.
Farmers Deep in Debt
Instead of receiving subsidies, oil palm farmers are trapped in debts. Why?
The Impact of Biodiesel
Although it decreases emissions, it turns out that the use of biodiesel has an impact on the engines used by industries that are obliged to use it, resulting in increases in production costs.
Interview with the BPDPKS CEO
Why are subsidies to biodiesel billionaires being prioritized?
Interview with a Wilmar Group Executive
A Wilmar Group high official behind the BPDPKS biodiesel subsidies.
Opinion: Biodiesel Subsidies
How the BPDPKS funds can be more transparent so that they do not only benefit big companies.
