T

he government expects to soon complete the establishment of a special public service agency (BLU) that will collect and manage a new levy on exports of palm oil, a minister says.

The special agency, which will work under the Office of the Coordinating Economic Minister, will act as a collector and manager of the palm oil levy to help develop the palm industry and pay for biodiesel subsidies in Indonesia, the world'€™s largest palm oil producer.

'€œThe establishment of the special agency will be completed this week. We will hold several meetings tomorrow and the days after,'€ Industry Minister Saleh Husin told reporters after a meeting at the Office of the Coordinating Economic Minister on Monday.

Saleh said in the next meetings, the ministries would discuss regulations and tariffs for the palm oil levy, which were expected to be finalized this week so that the agency could start operating shortly afterward.

Delays in the establishment of the BLU, which was initially planned for the end of May, as well as a new biofuel index price (HIP), are feared to disrupt the government'€™s biodiesel push this year that aims to boost domestic consumption of the more environmentally friendly fuel and reduce dependence on oil imports.

The Industry Ministry'€™s director general for agro-industry Panggah Susanto said the levy imposed on palm oil exporters would vary between US$20 to $50 per ton of crude palm oil (CPO) regulated under a Finance Ministry regulation.

A maximum levy of $50 per ton of CPO would be imposed on upstream industries, while the downstream industries would get lower rates.

'€œThere are 13 categories of tariffs, including for crude palm kernel oil [CPKO], olein and cooking oil, because the government wants to develop the CPO downstream industry, which is also expected to be sustainable,'€ Panggah said.

Aside from finalizing the tariff and regulations, Panggah said the government was working on technical details related to the fund utilization, including for biodiesel subsidies under the supervision of the Energy and Mineral Resources Ministry.

'€œThere are a lot of things to be finalized in the regulations, such as stipulations regarding the agency'€™s supervisory and advisory boards as well as punishments for violations,'€ Panggah said. Previously, President Joko '€œJokowi'€ Widodo signed a Presidential Regulation requiring palm oil exporters to pay a levy of $50 per metric ton for CPO and $30 for processed palm oil products, which came into force on May 25.

The levy, called the Crude Palm Oil Supporting Fund (CPO Fund), was part of the government'€™s efforts to pay biodiesel subsidies, as the country intends to lower fossil-fuel imports and help develop the local palm industry 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. Currently, CPO trades above $670 per ton and its benchmark price fell nearly 15 percent last year.

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.

Coordinating Economic Minister Sofyan Djalil said previously that the government would appoint three boards of management comprising the special agency'€™s structure '€” a steering committee consisting of six ministers and a board of commissioners as well as a board of directors filled with professionals.

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.