Indonesian government plans to rise palm oil export levies to support expansion of its palm biodiesel programs, said senior minister on Wednesday (02/26) - Photo by CMEA Office

JAKARTA (TheInsiderStories) – Indonesian government plans to rise palm oil export levies to support expansion of its palm biodiesel programs, said senior minister on Wednesday (02/26). The levies are currently set at a maximum of US$50 a ton.

According to the chief economic minister, Airlangga Hartarto, the world’ largest palm oil producer, is expanding its biodiesel program based on palm oil  in order to cut the energy imports. He said, the reasoned, the government lift up the levies cause the price difference between the biodiesel made from palm oil and a diesel has widened.

Earlier, the government targeting to impose export levies for crude palm oil (CPO) products and their derivatives starting Jan. 1, 2020, as the implementation of the mandatory 30 percent biodiesel (B30) use. As known, the country aimed to implement the B30 starting next year to reduce the current account deficit (CAD).

The ministry said, when the B30 takes effect its projected that the use of CPO will experience an increase and pushes the prices up. He estimating the CPO use during the application of B30 will rise to around 3 million tons.

Accordance to Minister of Finance Regulation Number 23 of 2019, stated that if the CPO price is above $570 a ton, a CPO and derivatives will be levied 50 percent. But, if the Prices above $620 a ton are subject to 100 percent full of levies. As of Sept. 20, the CPO price stood at $574.9 per ton. The decision postpone after receiving advice from the president.

Since last year, the country has implement zero export levy for palm oil products. The policy has been taken to protect the domestic palm oil industry from falling prices due to flagging exports and oversupply,

The higher levy set at $50 a ton if the price above $690 per ton. Then, if the price is in the range of $570 to $619 per ton, the export levy becomes $10 to $25 a ton. And, if the international price has returned to normal above $619, the export levies will again be set at $50 per ton.

The government expects that by lowering the levies, Indonesian exporters can set more competitive prices for palm oil shipments, and that in turn will help local palm farmers. Indonesia also imposes export taxes on crude palm oil when the reference price is above $750 per ton. The rules on the export taxes remain unchanged.

Aside from regulating CPO export levies, this regulation imposed by the finance ministry also stipulates the amount of the first and second derivative export levies of these commodities.

According to deputy chairperson of the Association of Indonesian Palm Oil Entrepreneurs Togar Sitanggang, the decline in CPO prices that occurred in the past year was caused by mismatches of domestic production and absorption and global markets. As a result, there is an oversupply of CPO which lowers commodity prices on international markets and local levels.

Therefore, he assessed that the government’ move to increase the absorption of domestic CPO is the right step.

Writting by Staff Editor, Email: theinsiderstories@gmail.com