Palm Oil Levels Up: The 92-Million-Ton Target and Indonesia’s Path to a Green Industry

For years, palm oil has been at the center of heated debate. Some see it as Indonesia’s economic hero, while others accuse it of driving deforestation. But in the middle of those contrasting opinions, the Indonesian government seems more confident than ever: palm oil is the future of the nation’s green economy and energy independence.

The year 2025 is set to be a milestone for the palm oil industry. The government has announced an ambitious goal — to reach 92 million tons of palm oil production, while pushing the entire sector toward sustainability and environmental responsibility.

This ambition is not without foundation. The truth is, Indonesia’s palm oil productivity can still grow much higher. Currently, the national average yield stands at around 4 tons per hectare, while large plantation companies can achieve 10–12 tons per hectare. Just imagine if all of Indonesia’s smallholder plantations reached that level — not only would state revenues soar, but millions of small farmers would see their livelihoods flourish.

palm oil industry

Smallholder Palm Oil Replanting: The Key to Productivity Growth

According to Dida Gardera, Expert Staff for Connectivity and Service Development at the Coordinating Ministry for Economic Affairs, Indonesia has around 16.38 million hectares of palm oil plantations. Of that total, 53% is managed by private companies, 6% by state-owned enterprises, and 41% by independent smallholders.

This shows how crucial small farmers are to the industry — yet they face the biggest challenges. Many still use non-certified seeds, apply fertilizers incorrectly, and rely on basic infrastructure. As a result, their yields are much lower compared to large-scale plantations.

To address this, the government launched the Smallholder Palm Oil Replanting Program (Peremajaan Sawit Rakyat / PSR). Through PSR, old and unproductive palm trees are being replaced with high-yielding varieties that can double or even triple output. Within just a few years, smallholder productivity is expected to rise significantly.

But PSR isn’t just about replanting trees. It’s also about transforming how smallholders manage their farms — making them more modern, efficient, and self-reliant. The government provides financial assistance, technical training, and organizational support to ensure farmers can stand on their own feet.

“Through PSR, we want to help smallholder farmers achieve productivity on par with big companies,” said Dida. “If we succeed, Indonesia can hit the 92-million-ton target while keeping sustainability intact.”

Strengthening ISPO: Sustainability Is Non-Negotiable

While productivity is one focus, sustainability is another cornerstone of Indonesia’s palm oil strategy. One major step is the reinforcement of the Indonesian Sustainable Palm Oil (ISPO) certification, now governed by Presidential Regulation No. 16 of 2025.

Unlike voluntary certifications elsewhere, ISPO is mandatory for all industry players — from big corporations and state enterprises to independent smallholders. For smallholders, the government is offering a four-year transition period and will cover the certification costs entirely.

The goal is crystal clear: to make Indonesian palm oil more accepted in global markets, especially as countries tighten their environmental and social standards. Under ISPO, every participant must comply with key sustainability principles — from responsible land use and forest protection to fair labor practices.

Even more impressively, the government is developing a digital ISPO information system. This system will map plantation data, land ownership, and certification status in a transparent and traceable manner. It means every certified plantation can be tracked, verified, and confirmed as being on legal, non-conflict land.

This upgraded ISPO system is a game changer. It’s not only about improving Indonesia’s global image but ensuring that every drop of palm oil produced is legal, traceable, and responsibly sourced.

Beyond Cooking Oil: Palm Oil’s Role in the Green Economy

Gone are the days when palm oil was seen only as an ingredient for cooking oil. The world is now shifting toward renewable energy and green industries, and palm oil sits right at the heart of this transformation.

According to government data, over 200 palm oil–based products are already commercialized — ranging from cosmetics, soap, and margarine to biofuels and bio-aviation fuels (bioavtur). In fact, around 40% of Indonesia’s biodiesel content now comes from palm oil.

That means palm oil is not only a major export earner, but also a strategic part of Indonesia’s energy transition — helping to reduce dependence on fossil fuels. The B40 biodiesel program, with 40% palm-based content, continues to expand across transportation and industrial sectors.

Research is also advancing in the development of bioavtur, a jet fuel derived from palm oil. Test flights with Garuda Indonesia have already shown promising results. Imagine a future where planes fly using jet fuel made partly from Indonesian palm oil — that’s no longer science fiction.

“Palm oil’s advantage lies in its productivity, which is about four times higher than other vegetable oils like sunflower or rapeseed,” Dida explained. “That makes it the most efficient and sustainable option to meet global vegetable oil demand.”

The Unsung Heroes: Smallholders and Plantation Workers

Behind the shining export numbers and innovation headlines, there are millions of small farmers and plantation workers — the true backbone of the palm oil industry.

Surjadi, a lecturer at the Faculty of Economics and Business, University of Indonesia, reminds us that the social dimension of palm oil must never be overlooked. Economic progress, he said, should always go hand-in-hand with community welfare and environmental protection.

Most smallholders own only 2–3 hectares of land. Many struggle to access fertilizers, quality seedlings, and affordable financing. To help them, strong farmer groups and cooperatives are essential — giving them more bargaining power when dealing with mills or large corporations.

Government agencies and private companies, Surjadi added, should act as partners and mentors, not just buyers of fresh fruit bunches (FFB).

He also highlighted the importance of protecting plantation workers’ rights. They deserve decent living conditions, fair wages, and clear employment status. True sustainability, he emphasized, is not just about protecting the forest — it’s about valuing the people who work within it.

No Downstream Without Upstream

Meanwhile, Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), issued a clear reminder: the country’s downstream industry will never thrive if problems at the upstream level remain unsolved.

Over the past five years, national palm oil output has largely stagnated. Increasing smallholder productivity, he said, is crucial for ensuring stable supply to downstream industries like biodiesel, oleochemicals, and other value-added products.

Eddy praised the biodiesel program as a major economic driver for rural communities. Before biodiesel took off, fresh fruit bunch (FFB) prices sometimes fell below production costs. Many farmers even left ripe fruit unharvested because it wasn’t worth the effort. But when biodiesel demand surged, prices stabilized, and village economies revived.

“Now, local economies in palm oil regions are alive again,” Eddy said. “FFB prices are stable, farmers’ purchasing power is up, and people can truly feel the impact of downstream integration.”

Palm Oil and Indonesia’s Green Future

Looking at the big picture, the government’s strategy for the palm oil industry is starting to form a clear and holistic framework.First, raise productivity and efficiency through PSR.
Second, strengthen sustainability compliance with ISPO.
Third, expand downstream processing and green innovation.

Together, these three pillars are shaping palm oil into not just an export commodity, but a key engine of Indonesia’s green economy. With strong policy coordination, palm oil can also play a vital role in achieving the country’s Net Zero Emission 2060 target — particularly through biofuel and low-carbon product development.

Of course, challenges remain. Issues like deforestation, land fires, and negative international campaigns still pose hurdles. But if Indonesia continues improving governance, enforcing ISPO standards, and empowering smallholders, it can prove that palm oil is not the problem — it’s part of the global solution.

From Plantations to the World: Indonesia’s Palm Oil Ready to Shine

The journey of Indonesia’s palm oil industry has been long and transformative — from crude exports, to biodiesel innovation, and now, toward a new era of sustainable green industry.

The 92-million-ton target is more than just a number. It’s a symbol of Indonesia’s determination to make palm oil not only an economic powerhouse, but also a pillar of energy independence and sustainable development.

If all stakeholders — the government, private sector, farmers, workers, and communities — work hand in hand, palm oil will not only remain a source of national pride, but also stand as a global example that scale and sustainability can coexist.

Because at the end of the day, palm oil isn’t just oil —it’s Indonesia’s green future.