Non-linear equity model for measuring patchouli oil at various levels

Abstract

Indonesian patchouli agroindustry involving many actors is one of the sectors that should be developed because it supplies most of the global patchouli oil. One thing that should be considered in the agroindustry development is the inequity of benefits among actors involved. The inequity is assumed to have made producers (farmers/distillers), as very decisive parties in the fulfillment of global market demands, i.e. the stability of supply and quality assurance of oil, unable to fulfill it. The main objective of this research is to develop a non-linear equity model to measure patchouli oil sales price at various transaction levels in order to ensure that all local value chain actors, especially farmers, distillers, and middlemen, get an equivalent ratio of benefits over their expenses. The return on investment (ROI) was chosen as an indicator because with the same ROI it can explain that each type of business in the patchouli value chain has the same attractiveness for investment, and all actors will get an equal ratio benefit (net profit) over their expenses (costs). The research was done in Gayo Lues District, Indonesia. Research findings recommend that to produce equal benefit among the actors, sales price per kg oil must be about IDR 536,718.55 for farmers; IDR 565,360.71for distillers and medium middlemen and IDR 595,565.95 for middlemen.