Plantation permits and HGU: the legal path for an estate

An oil palm estate in Indonesia needs two things before it can plant: a right to the land and a licence to farm it. Since a Constitutional Court decision in 2016, it needs both at once. A licence while the land right is still pending isn’t enough, and neither is a land right without a licence.

Around those two sit a spatial approval, an environmental approval, a release from the forest estate where the land needs one and a duty to help nearby communities build plantations of their own. Each step leaves a document, and a buyer or a lender will want to see all of them.

The law behind an estate

The main statute is the Plantation Law (Law 39 of 2014), amended by the Job Creation Law, now Law 6 of 2023. Government Regulation 26 of 2021 on the agriculture sector sets most of the plantation detail, and Government Regulation 18 of 2021 governs the land right. Licences go through the government’s online system (Online Single Submission, OSS), under the risk-based licensing rules of Government Regulation 28 of 2025, which replaced Government Regulation 5 of 2021 on 5 June 2025.

Article 42 of the Plantation Law let a company farm once it held a land right “and/or” a plantation business licence. In Decision 138/PUU-XIII/2015, delivered on 27 October 2016, the Constitutional Court ruled that the phrase has to mean the land right and the licence. So a block planted on a licence alone, before its land right is granted, breaks the rule, whatever the licence map shows.

The permits, roughly in order

The sequence varies with the land and the district, but a new estate usually moves through these steps:

• Spatial-use approval (Kesesuaian Kegiatan Pemanfaatan Ruang, KKPR), which confirms that the spatial plan allows a plantation on that land. It took the place of the old location permit under the Job Creation Law and Government Regulation 21 of 2021, and it’s the basis for acquiring the land.
• Release from the forest estate (pelepasan kawasan hutan) for any part inside a designated forest area. For a new plantation, only convertible production forest can be released, by decision of the forestry ministry.
• Environmental approval (persetujuan lingkungan), resting on an environmental impact assessment (Analisis Mengenai Dampak Lingkungan, AMDAL) for a large estate. The business licence isn’t issued without it.
• The plantation business licence (Perizinan Berusaha) for cultivation, issued through OSS. A mill needs a licence for processing, or the company holds an integrated one for both.
• The right to cultivate (Hak Guna Usaha, HGU), granted by decision of the land ministry once the land has been acquired and surveyed, and then registered at the land office.

Land acquisition sits between the first step and the last. The company has to settle with whoever holds or uses the land, often villagers with land letters or customary claims, and the record of those payments becomes part of the estate’s title history. The forest area check explains release and the cases where it was skipped.

The HGU itself

Under Government Regulation 18 of 2021, an HGU can be held by an Indonesian citizen or by a company set up under Indonesian law and based in Indonesia, which includes a foreign-owned company (PT PMA). It’s granted over state land or over land under a right of management (Hak Pengelolaan, HPL). The comparison with other titles is in land rights in Indonesia.

It runs for up to 35 years, can be extended for up to 25 and can then be renewed for up to 35. An extension can be filed once the estate is in production and must be filed before the term ends. A renewal can be filed up to two years after expiry. Either way, the land ministry checks that the land is still worked for its purpose, that the conditions of the grant were met, that the holder still qualifies, that the land still fits the spatial plan and that it isn’t needed for public use.

An HGU can carry a mortgage (Hak Tanggungan) and can be transferred. The holder may not leave the land idle or clear it by burning, and the minister can cancel an HGU before its term ends for breaking those rules. A holder that stops meeting the requirements to hold one has a year to transfer it, or the right lapses.

Area limits and the 20% duty

Government Regulation 26 of 2021, as amended by Government Regulation 52 of 2023, caps oil palm at 100,000 hectares for one plantation company across the whole country. State-owned companies and their subsidiaries are exempt when the central government has given them an assignment. The text counts per company, so ask a lawyer how it applies to a group of affiliated companies before adding land.

The second limit is a duty to the people around the estate. Under Article 12 of the same regulation, a company whose licensed land comes wholly or partly from other-use land outside an HGU (area penggunaan lain, APL) or from released forest must help build community plantations on 20% of that land. It has to do so within three years of the HGU being granted. The forms allowed by Agriculture Minister Regulation 18 of 2021 are credit, profit sharing, other agreed funding (a grant, for example) and other partnerships in productive activities.

Before the Job Creation Law, the Plantation Law put the 20% on the whole estate, and an estate that never met the duty under the old rules still owes it under them. How these schemes run on the ground, and where they go wrong, is in smallholders and plasma.

Where to start

• Ask for every document in the chain: the KKPR, the environmental approval with its AMDAL, any forest release decision, the plantation licence and the HGU decree with its certificate.
• Lay the HGU map, the licence area, the forest-area map and the planted blocks over each other, and list every block that falls outside the HGU.
• Note when the HGU’s term ends and whether the conditions for extension or renewal are met today.
• Ask how the 20% duty was met, and read the agreements, the beneficiary decisions and the handover records.
• Add up the company’s oil palm area across all its estates and compare it with the 100,000 hectare cap.

If you’re buying an estate that already runs, the wider checks are in buying an existing plantation.