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palm oil industry group has demanded that the government cut the export duty on processed palm oil to help boost shipments amid new challenges in overseas markets.

Lower export duty is necessary to enhance the competitiveness of refined palm oil from Indonesia, particularly given the country'€™s fierce rivalry with Malaysia, the Indonesian Palm Oil Producers Association (Gapki) has said.

'€œThe export tax for refined palm oil should be taken down to zero percent. That would release the price burden on producers and offer them an incentive,'€ Gapki executive director Fadhil Hasan said on Sunday.

Indonesia, the world'€™s top palm oil producer, charges a tariff of up to 12.5 percent on refined palm oil exports, while Malaysia, the second-largest supplier, applies zero duty on the exports of similar products, according to Gapki.

Such a change would put Indonesia'€™s refined palm oil on a level playing field with that of Malaysia in exporting to Indonesia'€™s leading buyer of palm oil, India, as well as other major markets, Fadhil added.

Gapki made the demand following a significant drop in palm oil exports to India in the first half of this year. Outbound shipments to India of Indonesian palm oil plunged by 37 percent, its highest level, to 2.12 million tons from January to June.

The fall was triggered by Indian buyers'€™ preference for other edible oils, such as soybean and sunflower oils. In addition to that, the drop in demand was also attributed to the higher import duty that India imposed on refined edible oils earlier this year.

India raised in January its import duty on refined edible oils, including palm oil, from 7.5 to 10 percent, in a bid to protect its local oil-seed growers and refiners from a surge in imports, most notably processed palm oil.

Another new challenge stems from the preferential trade agreement (PTA) between Malaysia and Turkey, a key emerging palm oil purchaser, which recently came into effect. The deal sees import duty on palm oil from Malaysia tumble to 20 percent from 31.2 percent, according to the association.

In response to Gapki'€™s demand to have export duty on refined palm oil written off, Trade Minister Muhammad Lutfi said the government was assessing the possibility.

'€œThat may be a viable option, as we want to be consistent in our goal to spur growth in the domestic downstream industry as well as boosting the competitiveness of our palm oil,'€ he said in a text message.

Palm oil is the second-largest contributor to overall exports in Southeast Asia'€™s largest economy after coal. It contributed US$19.22 billion, or 10.53 percent, to the country'€™s total export value of $182.57 billion last year.