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Indonesia raises palm oil export levies
The government seeks to discourage exports amid domestic cooking oil crisis.
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An undated aerial photo shows a palm oil field in Bulutumbang, Belitung. (JP/Donny Fernando)
T
he government has doubled the upper limit of palm oil export levies to dissuade companies from exporting the product amid a domestic shortage of palm oil-based cooking oil.
The Finance Ministry issued on Friday a regulation that raises the progressive levy up to US$375 per ton of CPO when international prices are above $1,500 per ton. Previously, the levy maxed at $175 per ton. The Crude Palm Oil Support Fund (BPDKS) will collect the funds.
Trade Minister Muhammad Lutfi said on Thursday that the government would raise the overall upper limit of palm oil export taxes – the export levies combined with custom duties – by 80 percent to US$675 per ton.
The Trade Ministry also issued this week ministerial regulation No. 11/2022 to retract the domestic market obligation (DMO) policy that required palm oil producers to set aside 30 percent of their output for domestic consumption. This is the fourth revision of that regulation.
“So, this is a market mechanism. They will no longer need a DMO. Because selling CPO domestically will be more profitable than exporting it,” Lutfi told lawmakers during a meeting with House Commission VI, which oversees trade and investment, adding that the rules came in effect that very day.
The two ministerial regulations mark a shift in the government's strategy of stabilizing domestic cooking oil supplies from using regulatory restrictions to using market mechanisms.
The government introduced the price cap to make cooking oil more affordable as the price of CPO and olein, the raw material to produce the product, surged in recent months. However, the cap resulted in a shortage as producers opted to export instead, skirting restrictions in the process.
