Income Inequality of Oil Palm Plasma Farmers in South Sumatra, Indonesia

One of the critical policies to encourage oil palm development in Indonesia is the Nucleus Estate Smallholders Project. This project involves engaging farmer organizations in operating and managing oil palm plantations. However, there are gaps in the organizational performance of plasma farmer cooperatives, which consequently affect oil palm productivity and farmers’ welfare. This paper analyzes the income gaps among oil palm plasma farmers who are associated with state and private companies in Musi Banyuasin regency, South Sumatra, Indonesia. The results of the analysis show that the income of plasma farmers from the private company is higher than that of the state company plasma farmers. The type of nucleus company has a significant effect on the plasma farm households’ income due to the differences in the organizational performance of the private- and state-sponsored cooperatives and the differences in the nucleus-plasma farmer relations. The cooperative that operates in a private company performs well, whereas the cooperative in a state company has ceased its operations. This research also found out that the number of household working members, income share from oil palm production, and land area have significant effects on the income of plasma farm households.