JAKARTA: A proposal to impose a surface water tax (PAP) on oil palms at 1,700 rupiah (US$0.10) per tree per month has sparked fierce opposition from smallholder farmers in Riau.
“We strongly object,” Palm Oil Farmers Union national council chairman Mansuetus Darto told The Jakarta Post last Friday, arguing the plan ignored the precarious economic reality of Indonesia’s plantation sector.
Mansuetus explained that, with an average of 130 to 140 trees per ha, a farmer would face monthly tax bills reaching hundreds of thousands of rupiah per ha.
For Riau’s estimated 1.7 million ha of smallholder plantations, totalling roughly 231 million trees, the levy would extract a staggering 393 billion rupiah per month from farmers.
For the province, considered the centre of Indonesia’s palm oil industry, that would translate to additional annual income of 4.72 trillion rupiah.
But it would cut farmers’ income by more than 6%, Mansuetus calculates, based on a fresh fruit bunch (FFB) price of three million rupiah per tonne and average monthly yields of 1.2 tonnes per ha.
“This does not even take into account fertiliser, harvesting or transport costs,” he warned, saying margins would become “dangerously thin”.
The farmer representative highlighted what he deems a critical flaw, arguing that the authorities overestimated tree density while most smallholders planted only 90 to 120 trees per ha.
“If we generalise to 136 trees per ha, many farmers will suffer losses,” he said, adding that farmers had been excluded from discussions on the policy.
“We have never been invited to discuss this tax plan,” he said, adding that the policy appeared to prioritise regional revenue while ignoring the impact on the palm oil business.
He noted that farmer income was already under pressure from volatile FFB prices, expensive fertiliser and confiscation actions by the Forest Enforcement Task Force created last year to crack down on illegal plantations and mining operations in forest areas.
Mansuetus slammed the proposed tax as “clearly unfair”, if applied equally to smallholder farmers and large corporations, and urged the regional legislative council to “immediately review and cancel the plan”.
“Taxes should facilitate farmer prosperity, not create hardship,” he said.
“Go to the field, listen to farmers’ voices; do not make policies from behind your desks!”
Meanwhile, the Indonesian Palm Oil Producers Association (Gapki) expects the tax to add an unsustainable cost layer to an “already overburdened” industry.
Gapki chairman Eddy Martono said the palm oil sector was buckling under a cascade of central government charges, including the export levy, the domestic market obligation, export duties and the upcoming export proceeds rule. — The Jakarta Post/ANN
