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)