Fairer deal urged among farmers, plantation firms

Fairer deal urged among farmers, plantation firms

JAKARTA (JP): The Indonesian Farmers Union (HKTI) urged the
government on Wednesday to improve the business partnership
between farmers and plantation companies.

HKTI's Chairman Siswono Yudohusodo said the nucleus and
smallholder cooperation scheme now implemented on plantations
only benefits the plantation companies.

He said the partnership known as the smallholders estate (PIR)
cooperation scheme had many weaknesses and was often used as a
ploy to exploit the farmers.

"Basically the scheme is very good in developing the country's
plantation sector. But it has to be improved so that it can reach
its goal to empower farmers as well as improve the productivity
of the plantations," he said at a news conference.

Under the PIR scheme, the farmers' bargaining power was very
weak, because it depended heavily on their nucleus firms, he
said.

"The nucleus firms and the farmers are not tied in a legal-
based agreement, which the evil nucleus takes as an opportunity
to deceive farmers," Siswono said.

Several evil nucleus oil palm plantation firms, for example,
often cheat the content ratio of fresh fruit bunches produced by
farmers, he said.

They also were not transparent in paying output produced by
farmers, he added.

The nucleus estate and smallholders model were first
introduced by the government in 1986 with the aim of attracting
the private sector to invest in the plantation sector, while
simultaneously helping resettle migrant farmers who came from
densely populated islands.

Under the scheme, nucleus companies allow farmers to manage
part of the companies' plantation areas. The nucleus firms also
provide farming materials, ranging from seedlings to fertilizers
to smallholder farmers, who are in turn obliged to sell their
harvest exclusively to their nucleus firms.

The area which has been managed by the farmers for more than
five years can be owned by the farmers.

Most of the country's plantation companies have operated under
the scheme. Most of the plantations using the scheme cultivate
palm oil, hybrid coconut and cocoa.

Siswono said many oil palm farmers suffered under the scheme
because their nucleus firms did not provide a sufficient amount
of fertilizers and other farming materials needed to manage their
land.

Some of them were given unproductive land, while others
suffered great losses because land was located too far from the
processing industries as fresh fruit bunches have to be processed
within 24 hours.

"To make it worse for farmers, there is no arbitrage body here
to settle any disputes with smallholder farmers and their
nucleus," he said.

Siswono, also the former minister of transmigration, called on
the government to allocate a part of the funds raised from export
taxes on commodities to help farmers.

The government has collected approximately Rp 11.8 trillion
from the export taxes on crude palm oil (CPO) and its derivatives
since the taxes were imposed from May last year until now, he
said.

The government levied taxes on the export of CPO, which is
used to produce cooking oil, in an attempt to force producers to
sell the commodity on the local market in order to lower domestic
cooking oil prices.

The export tax was lowered to 40 percent in February from a 60
percent tax imposed from May last year.

Siswono also urged the government to lower the export tax
imposed on CPO and its by-products to as low as 10 percent from
the current 40 percent to boost the country's CPO production as
well as CPO exports.

Siswono also urged the government to name a state-owned firm
to specially channel subsidized loans to farmers.

He said farmers would start planting paddy fields in October
and they would need farming materials such as seeds and
fertilizers, so the agency would have to be ready to provide the
farming loans before the planting season.

The subsidized loans were previously channeled by Bank
Indonesia but the loan package was later stopped following the
introduction of the new law on central banks.

Under the new law, Bank Indonesia operates mainly in monetary
management and the task of channeling subsidized loans is to be
transferred to a state firm.

But the central bank later agreed to continue the distribution
of the special loans until the end of the loan package in
September.

At least Rp 2.9 trillion of the subsidized loans which would
be given to farmers until September have been halted.

Siswono said the government could appoint state-owned Bank
Rakyat Indonesia to take over the central bank's duty in
channeling the government's subsidized loans. (gis)