From the end of this month, the government will impose a levy on the exports of palm oil to help develop the local palm industry and pay biodiesel subsidies
rom the end of this month, the government will impose a levy on the exports of palm oil to help develop the local palm industry and pay biodiesel subsidies.
Under the new regulation, signed by President Joko 'Jokowi' Widodo on Tuesday, palm oil exporters must pay a levy of US$50 per metric ton for crude palm oil (CPO) and $30 for processed palm oil products. The levy is imposed only if the CPO price exceeds $750 per ton.
Coordinating Economic Minister Sofyan Djalil said in Jakarta on Wednesday that the government was preparing a ministerial regulation as a legal basis for the establishment of a special public service agency (BLU) within the ministry that would collect and manage the levy.
'The ministerial regulation will be completed this week, followed by the appointment of the agency's board of directors soon after, so the levy will come into effect by the end of this month,' Sofyan said on the sidelines of the 2015 International Conference and Exhibition on Palm Oil in Jakarta.
He said the agency would have a structure comprising three boards of management ' a steering committee consisting of six ministers and a board of commissioners as well as a board of directors filled with professionals.
The six ministers that will comprise the steering committee are the coordinating economic minister, agriculture minister, industry minister, trade minister and finance minister, Sofyan added.
'It is important to select the right people for the board of directors, because they will manage the fund required for annual audits,' Sofyan said while refusing to mention prospective names for the position.
According to Sofyan, the agency is expected to collect at least $700 million each year, of which 40 percent is to be allocated to biodiesel subsidies, while the remaining 60 percent is for improving state plantations.
In mid-March, the government announced the levy, called the Crude Palm Oil Supporting Fund (CPO Fund), to be used primarily for biodiesel development as the country intended to lower fossil-fuel imports as well as improve local palm oil plantations through research, replanting and revitalization.
In addition to the levy, palm oil producers will continue to pay export tax of between 7.5 and 22.5 percent, if prices exceed $750 per ton.
The tax rate is reviewed every month based on monthly average prices in Jakarta; Rotterdam, the Netherlands; and Kuala Lumpur. But since October last year, duties were cut to zero as CPO prices dipped below the reference price.
Currently, CPO trades at $614 per ton and its benchmark prices fell nearly 15 percent last year.
Indonesia has, in recent years, boosted the domestic use of more environmentally friendly biodiesel, which is derived from palm oil, to cut carbon emissions and help absorb the increasing supply of the world's most-traded cooking oil.
The Jokowi administration has also increased the mandatory mix of biofuel in diesel fuel from 10 to 15 percent as part of its solution of taming the volatility of the rupiah, as reduced oil imports will improve the country's current account situation and in turn improve its economic fundamentals.
The administration has also raised biodiesel subsidies to Rp 4,000 (31 US cents) per liter from the previous Rp 1,500 to make the fuel more appealing to consumers.
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