Indonesia is pushing to ban new palm oil operations after last year's haze-belching forest fires were partly blamed on the industry's expansion, but producers are warning the move could hit the economy and green groups are sceptical.

Key points: Indonesian president proposes to halt new land grants for palm oil plantations

Indonesian president proposes to halt new land grants for palm oil plantations Indonesia is world's biggest producer of palm oil

Indonesia is world's biggest producer of palm oil Rapid growth of industry has been blamed for yearly forest fires

President Joko Widodo has proposed a halt on granting new land for palm oil plantations in the world's top producer of the edible vegetable oil — a key ingredient in many everyday goods, from biscuits to shampoo and make-up.

In a statement, Mr Widodo said "palm oil concessions available at the moment are already adequate" and urged producers to concentrate on using better seeds to increase their yields.

The haze from the 2015 forest fires shrouds Batanghari River in Jambi, on Sumatra. ( Reuters: Beawiharta )

Plantations on Sumatra island and the Indonesian part of Borneo have expanded in recent years as demand for palm oil has skyrocketed, bringing huge profits to companies and healthy tax revenues to the Government.

The rapid growth has been blamed for the destruction of tropical forests that are home to many endangered species, and forest fires that occur every year during the dry season due to illegal slash-and-burn clearances.

The 2015 blazes were the most serious for some years, worsened by dry weather caused by an El Nino phenomenon, and cloaked large stretches of South-East Asia in toxic smog for weeks.

The proposed moratorium on new concessions is the latest move by Mr Widodo aimed at reducing environmental destruction caused by the industry and halting the annual smog outbreaks.

The Indonesian Palm Oil Association warned the ban could damage a mainstay of South-East Asia's biggest economy that supports 24 million jobs, directly or indirectly.

"Palm oil is a strategic sector which contributed $19 billion in exports in 2015," said Tofan Madji, a spokesman for the group, which represents about 650 companies.

"It contributes to economic growth, especially in remote areas."

Main cause of fires is 'greed'

Activists were cautious about the proposal, with Greenpeace Indonesia warning it would not be effective unless the Government introduces a tough regulation, rather than just a weaker "presidential instruction".

The details of the proposed moratorium are still being discussed, and it is not yet clear when it will be adopted, the environment ministry said.

Kiki Taufik, Greenpeace Indonesia forest campaigner, also warned of implementation problems as various parts of government would need to work together for a ban to operate smoothly.

"This is probably one of the hardest parts — lack of coordination among officials is common and it often leads to bad implementation of regulations," Mr Taufik said.

Implementation of laws is also difficult because of heavily decentralisation of power across the archipelago of more than 17,000 islands, with rules set in Jakarta often flouted by local administrations.

Some believe that little can be done to stop the annual fires when there is still money to be made from palm oil.

"The main cause of forest fires is greed," said Herry Purnomo, a scientist at the Indonesia-based Centre for International Forestry Research.

"As long as people want a quick return, quick money, the forest will keep burning."

Thick smoke rises as a fire burns in South Sumatra in October 2015. ( Reuters: Nova Wahyudi )

AFP