The Indonesian Palm Oil Association (GAPKI) sees a gradual growth in crude palm oil (CPO) exports starting next year driven by an anticipated global economic recovery - Photo: Privacy

JAKARTA (TheInsiderStories) – Indonesian government to implement zero export levy for palm oil products, if the prices below US$570 a ton, said Ministry of Finance (MoF) on Tuesday (12/04). The higher levy set at $50 a ton if the price above $690 per ton.

The policy has been taken to protect the domestic palm oil industry from falling prices due to flagging exports and oversupply,

Under the MoF Regulation Number 152/PMK.05/2018, one of the largest palm oil producer not collect the levies if the CPO price below the threshold $570 per ton. During past week, the CPO price has been dwindled to around $410 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 MoF also stipulates the amount of the first and second derivative export levies of these commodities. After this regulation was implemented, the Ministry of Agriculture, Ministry of Trade, Ministry of Energy and Mineral Resources, and the Palm Oil Plantation Fund Management Agency were asked to evaluate each export levy monthly by referring to international CPO price fluctuations.

In response to this, the Deputy Chairperson of the Association of Indonesian Palm Oil Entrepreneurs in Trade and Sustainability Togar Sitanggang said that the planned is estimated to have an impact on price improvements for these commodities in January 2019.

According to him, 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, Sitanggang assessed that the government’s move to increase the absorption of domestic CPO is the right step.

Meanwhile, the performance of the domestic palm oil industry in October showed positive signs compared with the previous month by two major indicators. Firstly, the uptake of domestic CPO for October biodiesel has increased sharply. Secondly, October exports increased even though they remained thin thanks to demand from China.

Uptake of CPO for domestic biodiesel in October was recorded at 519,000 tons, better than September’s absorption of 400,000 tons and previous months which were only in the range of 215,000 – 290,000 tons per month.

Meanwhile, in foreign trade, CPO exports and derivatives in October rose 5 percent to 3.35 million tons compared to September at 3.19 million tons.

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