Indonesia’s Confiscated Palm Oil Plantations Spark Environmental and Legal Debate

In a controversial move, the Indonesian government has transferred over 221,000 hectares of confiscated oil palm plantations to a state-owned company, PT Agrinas Palma Nusantara, to bolster national energy security through continued palm oil production. The decision, announced on 9 March 2025, has reignited tensions between the state’s economic priorities and environmentalists’ calls for reforestation, while raising legal and procedural questions about the transfer process. The plantations, seized as part of a corruption probe into the privately-owned Duta Palma Group, include significant portions of protected forest areas in Sumatra and Kalimantan, placing the government’s environmental commitments under intense scrutiny.

The handover marks the first time Indonesian authorities have entrusted such assets to Agrinas, a state firm now tasked with managing land nearly a third the size of the ambitious Nusantara Capital City project. While the government frames the move as a step towards energy self-sufficiency through biodiesel production, critics argue it risks perpetuating deforestation and biodiversity loss, undermining Indonesia’s climate goals. This clash of priorities—economic security versus environmental restoration—encapsulates broader challenges facing Indonesia, the world’s largest palm oil producer.

A Corruption Probe Yields Vast Assets

The plantations were confiscated from nine subsidiaries of Duta Palma Group, including PT Palma Satu and PT Banyu Bening Utama, following allegations of falsified permits and illegal operations in protected forest zones. Febrie Adriansyah, an investigator at the Deputy Attorney General’s Office for Special Crimes, confirmed during a press conference in Jakarta on 9 March that the Attorney General’s Office (AGO) lacked the capacity to manage the sprawling estates directly. “We have limitations in managing the [plantations],” Febrie told reporters, justifying the decision to involve the State-Owned Enterprises (SOEs) Ministry and Agrinas as temporary custodians.

The legal backdrop to the seizure is tied to the conviction of Duta Palma founder Surya Darmadi, who received a 16-year prison sentence in 2023 from Indonesia’s highest court for bribery, money laundering, and operating plantations in designated forest areas. The ongoing investigation into Duta Palma’s operations has exposed systemic issues in land use permits and oversight, with Greenpeace Indonesia estimating that around 45,280 hectares of the group’s plantations lie within protected forest zones, including 12,227 hectares under PT Palma Satu and 6,015 hectares under PT Banyu Bening Utama.

Environmental advocates have seized on these figures to argue that the confiscated land should be restored to its natural state rather than repurposed for further palm oil cultivation. “If so, the government should prioritize land restoration instead of allocating it to any other companies,” Arie Rompas, forest campaign team leader at Greenpeace Indonesia, told The Jakarta Post on 10 March. Rompas highlighted the potential for reforestation to protect biodiversity and mitigate climate change, urging authorities to remove these areas from commercial concessions entirely.

Energy Security Versus Environmental Damage

The government, however, views the plantations as a critical asset in achieving energy self-sufficiency, a cornerstone of President Prabowo Subianto’s administration. Palm oil, the most efficient raw material for biofuel production, plays a central role in Indonesia’s strategy to expand the use of fatty acid methyl esters (FAME) blended biodiesel. Agrinas president director Agus Utomo, a former Indonesian Military lieutenant general, expressed confidence in the company’s ability to “optimize the management of the palm oil plantations” in line with Indonesian Sustainability Palm Oil (ISPO) standards. Speaking after the handover, Agus also assured that no workers previously employed by Duta Palma would face layoffs, stating, “We have been approaching them for several days to join, and we will not terminate their employment.”

Yet environmental groups remain unconvinced by promises of sustainable management. Scientific evidence has long linked Indonesian palm oil plantations to deforestation, carbon emissions, and habitat destruction for endangered species like the orangutan. “Relying on food commodities to support energy security can lead to various problems, including the expansion of plantation land and subsequent deforestation,” warned Arie Rompas of Greenpeace. Critics point out that using palm oil for biodiesel may exacerbate land tenure conflicts, particularly in areas already scarred by Duta Palma’s operations. Teo Reffelsen, legal and advocacy manager at the Indonesian Forum for the Environment (Walhi), echoed this concern, telling The Jakarta Post on 10 March that transferring the land to Agrinas “will complicate the [longstanding] tenure conflicts.”

The scale of the environmental stakes is staggering. Indonesia has lost millions of hectares of rainforest to palm oil cultivation over recent decades, contributing significantly to global greenhouse gas emissions. While the government has pledged to halt deforestation under international climate agreements, such as the Paris Accord, the decision to continue palm oil production on confiscated land raises questions about the sincerity of these commitments. If confirmed, the continued exploitation of these areas may undermine Indonesia’s targets for reducing emissions, though official data on the environmental impact of this specific transfer remains unavailable.

Legal and Procedural Concerns

Beyond environmental critiques, the transfer process itself has drawn sharp criticism for lacking transparency. Greenpeace’s Arie Rompas questioned the legal basis for appointing Agrinas as the temporary operator without a public auction, a standard procedure for managing confiscated assets. “Though Agrinas is a state firm, the confiscated assets must still adhere to established procedures. SOEs have no grounds to bypass the auction process,” he argued. Rompas also cautioned that Agrinas could face financial and legal risks if ongoing court cases related to Duta Palma result in the land being returned to its original owners after state investments have been made.

Febrie of the AGO acknowledged during the 9 March press conference that legal proceedings against Duta Palma could be protracted, though neither the SOEs Ministry nor Agrinas has clarified the duration of the state firm’s custodianship. The absence of a clear timeline or competitive bidding process fuels suspicions of procedural irregularities, even if no evidence currently suggests misconduct by Agrinas or the ministry.

Adding to the complexity, President Prabowo Subianto issued Presidential Regulation No. 5/2025 on 21 January, establishing a task force led by Defense Minister Sjafrie Sjamsoeddin to address illegal oil palm plantations in forest areas. Comprising officials from the AGO, the Forestry Ministry, and other institutions, the task force is mandated to impose fines or seize non-compliant plantations and report directly to the President every six months. While this initiative signals a tougher stance on illegal land use, environmentalists fear it may not translate into meaningful reforestation if confiscated land continues to be repurposed for palm oil production under state control.

Balancing Economic Needs and Global Responsibilities

Indonesia’s reliance on palm oil is deeply entrenched, both as a driver of economic growth and a source of employment for millions. The commodity accounts for a significant share of the country’s export revenue, and the Prabowo administration’s focus on energy security reflects a pragmatic approach to leveraging existing resources amid global energy transitions. Biodiesel production, in particular, is seen as a way to reduce dependence on imported fossil fuels, a priority for a nation of over 270 million people.

However, the environmental costs of this strategy are undeniable. Deforestation linked to palm oil has not only harmed local ecosystems but also damaged Indonesia’s international reputation on climate action. The European Union, a former major market for Indonesian palm oil, has imposed restrictions on imports tied to deforestation, pushing Jakarta to seek alternative buyers while defending its sustainability credentials. If the management of confiscated plantations by Agrinas fails to adhere to strict environmental standards, it could further strain Indonesia’s trade relations and climate diplomacy, though such outcomes remain speculative at this stage.

For local communities in Sumatra and Kalimantan, the stakes are even more immediate. Land tenure disputes, often exacerbated by large-scale plantations, have long plagued rural areas, displacing indigenous groups and smallholder farmers. Walhi’s Teo Reffelsen warned that the transfer to Agrinas risks entrenching these conflicts, particularly if the state firm prioritizes production quotas over community rights. While Agus Utomo’s pledge to retain Duta Palma workers offers some reassurance, it remains unclear how Agrinas will address broader social impacts in the affected regions.

A Path Forward?

The controversy surrounding the confiscated plantations underscores the delicate balance Indonesia must strike between economic imperatives and environmental stewardship. Restoring the 45,280 hectares of forest land identified by Greenpeace could serve as a powerful signal of commitment to sustainability, potentially earning international support for reforestation initiatives. Conversely, continued palm oil production under state oversight may provide short-term economic gains but risks long-term ecological and reputational damage.

As legal proceedings against Duta Palma unfold, the government faces mounting pressure to clarify its strategy for managing confiscated assets. A transparent auction process for future transfers, coupled with a robust plan for reforestation in protected areas, could help mitigate criticism. For now, the decision to entrust Agrinas with over 221,000 hectares of contentious land has opened a Pandora’s box of environmental, legal, and social challenges—ones that will test Indonesia’s resolve to align its policies with global sustainability goals.