FIGURING out what to do with the plantation business under Felda Global Ventures Bhd (FGV) has been a lingering headache for the Federal Land Development Authority (Felda).

In the last three years, Felda has seen the income it receives from FGV whittled down. It has come to a point where it feels something needs to be done to ensure that Felda, by its own estimation, can receive the up to RM3bil a year needed to run the government agency and its programmes for settlers as smoothly as possible.

Felda chairman Tan Sri Shahrir Samad has made it clear that he would like to see the plantation group better managed because it is the cash cow that the federal government entity depends on to help the settlers.

“At the end of the day, the main issue is still on how FGV will be able to deliver a sustainable income to Felda,” Shahrir tells StarBizWeek.

In a nutshell, a sustainable income is crucial for Felda because it acts like a bank for all its settlers.

“Do you know that settlers will get back 100% from the sale of their fresh fruit bunches and Felda will need to source for additional funds to provide these settlers with advanced money while they wait for their trees to mature in the case of new plantings or replanting exercise,” explains Shahrir.

Compounding matters is the fact that FGV is a political hot potato because the settlers are predominantly strong supporters of the ruling party. The fact that problems within FGV draws the immediate attention of Putrajaya underscores this fact.

Putting the politics aside, Felda has been looking into ways to improve the returns from its assets since January this year when Shahrir took over the helm.

In the past one month, there have been several corporate proposals being tossed about by bankers – ranging from privatising FGV to getting a strategic shareholder to come in and take part of Felda’s 33% stake in the listed entity. Towards this end, one name that has cropped up is Martus Sitorus, the Indonesian co-founder of Wilmar International Ltd.

However, so far no plan has been viable because of the sensitivities involving FGV.

Things at FGV came to a boil two weeks ago when the board led by Tan Sri Mohd Isa Samad suspended four top officials including group president and chief executive officer Datuk Zakaria Arshad pending an investigation related to a subsidiary of FGV.

Amidst this scenario, a proposal came about for the creation of a business trust for FGV’s plantation. This was something that was discussed at the very high level at Felda and Putrajaya.

Shahrir says he had heard of such plans but deftly brushed aside from commenting on it.

“I have heard it only for the second time,” he says.

In an announcement to Bursa Malaysia late Thursday, FGV stated that there was no discussion on the creation of a plantation trust at the FGV and Felda boards.

Sources say the plan in a nutshell is for Felda and the government to consider injecting the plantation business into a business trust with Felda as the plantation trust manager.

What that does to the land lease agreement (LLA) between Felda and FGV will need to be ironed out. As for FGV shareholders, especially minority shareholders, what would the carving out of the plantation business mean for the company and shareholder value should the latest plan by Felda get the rubber stamp from authorities?