Indonesian government will impose export levies for crude palm oil (CPO) products and their derivatives starting Jan. 1, 2020 - Photo by CMEA Office

JAKARTA (TheInsiderStories) – Indonesian government will 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, said the senior minister on Tuesday (09/24). As known, the country aimed to implement the B30 starting next year to reduce the current account deficit (CAD).

In the media briefing, coordinating minister for the economic affairs (CMEA), Darmin Nasution on Tuesday (9/24), 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 US$570 per 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.

Nasution revealed, the decision to postpone the application of export levies 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.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com