Budget for regional areas: Re-setting the allocation of palm oil revenue sharing fund

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Bisnis Indonesia

12 April 2023

By: Annasa R. Kamalina

Jakarta - The Finance Ministry considers setting a minimum allocation of revenue sharing fund (DBH) on oil palm products at Rp1 billion. The plan for a minimum allocation limit aims at a fairer DBH distribution. 

This proposal is considered to prioritise the aspect of equity in areas that have been palm oil production centres. Previously, several palm oil producing regions received a much smaller allocation of DBH. 

Finance Minister Sri Mulyani Indrawati said that the government was preparing a regulation in the form of a Government Regulation related to the palm oil DBH scheme. 

“We propose to implement a minimum allocation limit per region in 2023, so that each region would receive at least Rp1 billion per region,” she said at the Parliament Complex on Tuesday (11/4). 

Last year, she said, the price of crude palm oil (CPO) was very volatile and affected export levy and export duty which were the source of DBH. 

Sri Mulyani explained that in 2022, there was an instance when Indonesia gained no revenue from export levy and export duty due to the export ban policy and the implementation of 0% export levy. 

“For several months the export levy and export duty were zero, so zero revenue, which means the source of funds for revenue sharing was zero. Then the [DBH] amount would be too small, so we decided to set a minimum limit, at least Rp1 billion per region,” she said. 

Furthermore, the allocation per region will be divided into two criteria, based on the formula, namely land area and land productivity level. In addition, it will be based on performance, such as changes in poverty level and regional action plans in the sustainable palm oil programme. 

In her presentation, the Finance Minister said that, based on the available data, the number of regions that would receive palm oil DBH was 350 regions. 

“This consists of producing regions, bordering regions, and provinces where the producing regions are located, including the four new autonomous regions in Papua,” she said. 

Sri Mulyani elaborated that, by definition, a palm oil producing region is a region that has oil palm plantations and/or produces crude palm oil, while a province that receives DBH is a province that has any producing region. 

In this plan, there are 30 provinces that will receive DBH between Rp1 billion-Rp82.1 billion. There are 240 producing regencies/cities that will receive between Rp2.46 billion-Rp49.5 billion. 

In addition, 80 bordering regencies/cities will receive revenue sharing ranging from Rp1 billion-Rp14.8 billion. 

On the other hand, in the 2023 State Budget (APBN), the overall DBH allocation is Rp136.3 trillion, higher than the 2022 period. 

The DBH allocation includes the DBH for palm oil which is allocated at Rp3.4 trillion. 

FFB price 

Meanwhile, several palm oil producing regions have set the price for fresh fruit bunches (FFB) for a certain period. 

The Riau Province Plantation Agency has set the FFB price for 12 to 18 April 2023 period, which saw an increase for each age group of oil palm. The highest increase occurs in the 10-20 year age group by Rp40.08/kg or 1.47% from last week’s price. 

“The purchasing price for farmers’ FFB for the next week period increases to Rp2,769.57/kg,” said Head of Processing and Marketing of Plantation Products at the Riau Plantation Agency, Defris Hatmaja, on Tuesday (11/4). 

He explained that the reason for the increase in FFB price this period was due to the rising CPO selling price from the companies that provide the data source. 

Meanwhile, the South Sumatra Province Plantation Agency has set the price for oil palm FFB for the first period of April 2023 at Rp2,641 per kilogram. This price decreased by Rp37.7 per kilogram compared to the oil palm FFB before the fasting month in the second period of March at Rp2,678 per kilogram. 

Agriculture Facilities and Infrastructure Senior Expert Analyst at the South Sumatra Plantation Agency, Rudi Arpian, explained that the price of CPO in this first period was set to Rp12,133 per kilogram or down Rp402 per kilogram. 

“Meanwhile, our kernel price is set at Rp6,157 per kilogram.”