TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

India'€™s higher import duty hurts RI exports

An industry group in Indonesia, the world’s top palm oil producer, has demanded the government lower its palm oil export tax to maintain a competitive export edge over India, its biggest buyer

Linda Yulisman (The Jakarta Post)
Sat, January 11, 2014

Share This Article

Change Size

India'€™s higher import duty hurts RI exports

A

n industry group in Indonesia, the world'€™s top palm oil producer, has demanded the government lower its palm oil export tax to maintain a competitive export edge over India, its biggest buyer.

The request followed India'€™s announcement Thursday that it had raised the import duty on refined-edible oils to 10 percent from 7.5 percent in a bid to protect its domestic oil seed growers and refiners from cheaper overseas suppliers.

At the same time, it maintained import duties of crude edible oil at 2.5 percent to further benefit its processing industry.

Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan said Friday that India'€™s tax increase would significantly affect sales of refined palm oil from Indonesia as the price would rise.

'€œThe government should counter this by lowering export tax on refined palm oil, thereby, regaining its price competitiveness and maintaining exports,'€ he told The Jakarta Post.

Export taxes for refined products should be set as low as zero percent depending on the degree of processing, Fadhil said.

Through a new tax regime launched in 2011, Indonesia cut export tax on refined palm oil products from 25 percent to 10 percent.

Without the domestic tax correction, Indonesian exporters could explore new markets and offset potential losses in India, Fadhil added.

Speculation abounds that the new policy could drive India to shift from refined palm oil to crude palm oil (CPO), a move that would benefit Malaysia, its major rival.

The world'€™s second-largest palm oil supplier now imposes lower duties on its CPO exports compared to Indonesia following the slashing of export tax to between 4.5 percent and 8.5 percent in late 2012 from 23 percent.

From January to November last year, delivery of palm oil and palm kernel oil to India saw a rise of 6.81 percent to hit 5.53 million tons from a similar period in 2012, according to statistics at Gapki.

India'€™s refined palm oil jumped by 40.5 percent to 2.2 million tons in the year to October 2013 as an effect of Indonesia'€™s measures to cut refined product export taxes and push up CPO duties; intended to spur growth in the domestic refining industry, Reuters reported.

Imports surged by 172 percent in November, badly affecting Indian growers and refiners. The industry had seen its utilization capacity hit 30 percent from more than 50 percent a year earlier due to higher refined oil imports, the Solvent Extractors'€™ Association of India said as quoted by Bloomberg.

In response to the issue, Deputy Trade Minister Bayu Krisnamurthi said that the government would not take any immediate measures but would study the situation carefully.

Although according to its temporary estimate, the impact of the tax increase on local palm oil exporters would be minor, it would be necessary to evaluate further developments caused by the new policy, he said.

'€œThe effect will not be worrisome, but it is something that we need to monitor,'€ Bayu told reporters at his office. The recent tax increase would not likely result in a change in the composition of CPO and processed products in exports, Bayu further said.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.