Minister Supports Downstreaming of Palm Oil Cooperatives to Build Cooking Oil Refinery

Cooperatives Minister Ferry Juliantono is encouraging palm oil cooperatives to expand their businesses into processing derivative palm oil products, including building cooking oil refining facilities.

Ferry said the construction of a refinery could be the next stage after cooperatives have their own crude palm oil (CPO) processing mills.

“If more cooperatives already have CPO mills, it is not impossible that we will enter derivative products. We can build our own cooking oil refinery,” Ferry said at the inauguration of the KUD Sejahtera CPO mill in Musi Banyuasin, South Sumatra, on Wednesday.

According to him, such downstream development is needed so that cooperatives and oil palm farmers do not only earn income from selling fresh fruit bunches (TBS), but can also enjoy added value from processing up to the final product.

Ferry said smallholder plantations still face limited access to downstream processing. Therefore, he believes cooperatives need to be encouraged to become business entities capable of managing farmers’ economic activities, including entering the palm oil processing sector.

He added that the government is also encouraging PT Agrinas Palma Nusantara, a state-owned enterprise assigned to manage oil palm plantations resulting from forest area enforcement, to expand cooperation with cooperatives in managing oil palm land under the company’s management.

According to Ferry, strengthening this cooperation is expected to make cooperatives not merely associations of members, but to develop as business entities owned by oil palm farmers.

Ferry said that if the development of cooperative-based palm oil derivative industries can be realised, cooking oil produced through cooperative refineries could potentially be distributed through the network of Merah Putih Village/Sub-district Cooperatives in various regions.

The CPO processing mill managed by Koperasi Unit Desa (KUD) Sejahtera in Musi Banyuasin Regency, South Sumatra, is targeted to become a model for cooperative-based palm oil downstreaming to be replicated in other regions.

The mill, with an investment value of around Rp100 billion, has a processing capacity of up to 45 tonnes of fresh fruit bunches (TBS) per hour. The CPO produced is currently marketed to a number of industrial partners, one of which is Wilmar.