Lewa Pardomuan, Kuala Lumpur – A rally in palm oil prices is fuelling widespread looting in plantation areas in Indonesia, with armed gangs targetting mainly state-owned farms.

Industry sources said on Wednesday the looting has gained momentum since July when edible oil prices started to rally because of low stocks. "Looters have come back. They will come to the plantations by trucks and steal fresh fruit bunches," one source from an Indonesian state-run plantation firm told Reuters.

"Those people won't hesitate to kill you or burn your house," the source said the sidelines of a palm oil conference in Kuala Lumpur. "Security officers seem to be hopeless. We have suffered billions of rupiah in losses," said the source.

Indonesia is the world's second biggest producers of palm oil after Malaysia.

Many of its farms have been plagued by looting after the country's worst economic crisis in decades led to a breakdown in law and order in parts of the country and widespread unemployment.

The looting subsided earlier this year with lower prices. But it reemerged in July when palm oil futures in Malaysia started to increase because of a decline in stocks. Prices hit a 22-month high of 1,315 ringgit ($346.05) a tonne in August 8. Fresh fruit bunches hover around 575 rupiah ($0.07) a kg compared with 300 rupiah ($0.04) before the price hike, said the source. The fruit is normally sold to local refiners, which do not question its origin, the source said.

Local newspapers in Indonesia reported that state-run and private plantations suffered losses of least three trillion rupiah ($351,493) last year because of looting. Plantation sources said most of the looting took place in Sumatra, the country's main growing area and in particular the North Sumatra province.

Plantations owned by state-firm PT Perkebunan Nusantara II (PTPN II) in North Sumatra's Binjai regency is among the worst hit.

The area's crude palm oil processing plant operated at just 60 percent of production capacity last year because of a shortage in fresh fruit bunches.

A police officer in Binjai said: "Looting still happens, but I think it is subsiding." He declined to elaborate and PTPN officials could not be reached for comment on Wednesday.

Palm oil plantations cover 2.8 million hectares (6.9 million acres) of land in Indonesia, in which 490,000 hectares belong to state plantations. There are 14 state-run plantation firms which also manage coffee, rubber, cocoa and sugarcane estates. Derom Bangun, chairman of the Indonesian Palm Oil Producers Association (Gapki), said this week the country's palm oil production may fall short of a 7.2 million-tonne target for 2001 because of security problems and a possible drought.

Indonesia produced 6.5 million tonnes of palm oil in 2000 and state-run firms accounted for around 35 percent of output. Plantation sources said looting had worsened after former president Abdurrahman Wahid said last year that 40 percent of areas under state firms were seized or acquired without paying due compensation. But one source said some state-run companies had encouraged local people to manage parts of the plantations to ease the tension.