350 palm oil producing regions to receive revenue sharing funds of Rp3.4 trillion

This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Investor Daily

12 April 2023

Jakarta - The government through the Finance Ministry will distribute Rp3.4 trillion of revenue sharing funds (DBH) for palm oil producing areas, in line with the allocation in the 2023 State Budget. The funds will be distributed to 350 regions including the four new autonomous regions (DOB) of Papua. 

“The share of DBH for palm oil is 4% at minimum and can be adjusted by taking into account the state’s financial capacity,” said Finance Minister Sri Mulyani Indrawati in a Work Meeting with the House of Representatives (DPR) Commission XI at the DPR Building on Tuesday (11/4/2023). 

She said the DBH for palm oil came from export levy and export duty for palm oil. The share of DBH for palm oil is 4% at minimum and can be adjusted by taking into account the state’s financial capacity. In detail, the distribution formula for regions that will receive provincial palm oil DBH is 20% of the 4% minimum DBH, producing regencies/cities 60% of the 4% minimum DBH, and bordering regencies/cities 20% of the 4% minimum DBH. 

The calculation is that the proportion of provincial revenue is 20% multiplied by 4%, so that the DBH for palm oil is 0.8% from export levy and export duty sources of funds. The proportion of revenue for producing regencies/cities is 60% multiplied by 4%, so that the DBH for palm oil is 2.4% from export levy and export duty sources of funds. The proportion for bordering regencies/cities is 20% multiplied by 4%, so that the DBH for palm oil is 0.8% from export levy and export duty sources of funds. 

Sri Mulyani said, considering the current dynamics of the global market, the amounts and rates of export levy and export duty are highly dependent on prices and tariffs. Therefore, the Finance Ministry proposes to apply a minimum allocation limit per region in 2023. 

Based on the Finance Ministry’s study, a minimum allocation limit per region for the 2023 fiscal year will be applied at Rp1 billion per region. Fund calculation for the allocation per region is divided into two criteria, namely formula allocation (land area and land productivity level) and performance allocation (changes in poverty level and regional action plan for sustainable palm oil). 

“Because we saw that in several months of 2022, export levy and export duty were 0, so that the revenue was 0. The funds that were the source to be shared were 0. The amount was too small, there are regions that would receive very little, so we decided to set a minimum allocation limit per region. They would receive Rp1 billion per region,” said Sri Mulyani. 

She said the DBH for palm oil will be used for the construction and maintenance of road infrastructure and other strategic activities as stipulated in the Finance Minister Regulation. The distribution of palm oil DBH will be carried out in two phases in one year, in May (50%) and October (50%). “Since we will distribute it this May, we hope that the Draft Government Regulation [RPP] will be completed after we have consulted with the DPR Commission XI,” said Sri Mulyani. 

On that occasion, DPR Commission XI Member from the Golkar faction Puteri Komarudin highlighted several matters in the distribution of palm oil DBH in 2023. First, regarding the performance allocation which is a requirement for the calculation per region. Because the requirement includes the indicators of changes in poverty level and regional action plan for sustainable palm oil. 

“Why were these two indicators chosen, because palm oil DBH is essentially used for infrastructure according to the concerns of the head of the palm oil producing region and is not directly related to poverty alleviation efforts. Will other strategic activities also be arranged for activities that can help alleviate poverty, or are there other factors related to this,” said Puteri. 

Second, regarding the readiness of the Finance Ministry’s data on the regional action plans for sustainable palm oil. In this case, to what extent does the Finance Ministry have data on regions that already have such action plan. Whether the funds will be given directly once there is an action plan or are there certain standards that must be met by the action plan, where regional heads must adjust to the standards required by the Finance Ministry. 

“Are there other strategic activities arranged by the Finance Ministry that can be allocated for the welfare of oil palm smallholders because there are still many oil palm smallholders who need government support for fertilisers, seeds, and training,” she said.