The Indonesian government has ordered an investigation into hundreds of palm oil companies that allegedly failed to raise the purchase price of palm fruit from farmers even though market prices have recovered after a slump triggered by the country's new export policy.
Indonesia's Agriculture Minister, Amran Sulaiman, said his ministry had received reports involving between 270 and 300 companies that had not adjusted their purchase prices in recent days.
The information had been passed on to the police, including a special crime unit, for further investigation.
According to him, the majority of the approximately 1,900 palm oil companies in Indonesia have raised the prices paid to farmers. However, the government does not want a few companies to take advantage and affect the income of millions of smallholders who depend on the palm oil sector.
The issue arose after Indonesia announced a major overhaul of its commodity export system in May.
The announcement caused domestic palm oil prices to plummet due to concerns about delivery delays and rising stockpiles.
The price of fresh fruit bunches reportedly fell from around 3,800 rupiah per kilogram to as low as 1,500 rupiah before recovering to 3,400 rupiah.
In a related development, palm oil futures prices in Kuala Lumpur also recovered after suffering pressure following changes in Indonesia's export policy.
However, farmer representatives expressed concerns over the lack of clarity in the pricing mechanism under the new system as well as the increase in fuel costs which could potentially reduce farmers' profits in the future.
