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Jakarta Post

Biofuel producers demand exemption from palm oil levy

  • Grace D. Amianti

    The Jakarta Post

Jakarta   /   Fri, May 8, 2015   /  08:19 am

Domestic biofuel producers have demanded exemption from paying levies for the shipment of palm oil products overseas, as such policy will create more burdens for the industry.

'€œWe are hoping that we will be exempt from the rule of paying US$30 per metric ton of processed palm oil products
because the domestic sales price is already low,'€ Biofuel Producers Association (Aprobi) executive chairman Paulus Tjakrawan said on Thursday.

Paulus said biofuel producers had suffered from margin compression following the slump in global CPO prices, which were currently traded at $614 per ton, as the government has also yet to set the newest benchmark price for biodiesel through export reference price (HPE).

The government is in the process of setting a new biodiesel price with a formula of CPO price plus $125 per ton and transport cost.

The $125 figure is based on the government'€™s recent calculation, lower than the previous $188.

'€œThe new benchmark price formula will not offer any profit for us and it will be heavier if the CPO price rebounds to above $750, which means we should also pay export tax besides paying the additional levy,'€ Paulus said.

Under an existing rule, exporters will have to pay between 7.5 percent and 22.5 percent in export tax if the CPO price is higher than $750 per ton. If the CPO price is lower than $750 per ton, exporters will be exempt from the export tax.

However, they will have to pay the levy regardless of the CPO price, as stated in a regulation to take effect later this month.

Edi Wibowo from the Energy and Mineral Resources Ministry said biofuel producers could enjoy benefits from the levy, which will be paid back to the industry in the form of biodiesel subsidies and improvements to the palm oil

'€œThe palm oil industry currently pays zero percent export tax, but will pay an export levy that will be paid as a subsidy by the government for biodiesel,'€ said Edi, a division head at the ministry'€™s directorate general of new,
renewable energy and energy conservation.

President Joko '€œJokowi'€ Widodo signed a new regulation on Tuesday evening requiring palm oil exporters to pay a levy of $50 per metric ton for CPO and $30 for processed palm oil products.

The levy, called the Crude Palm Oil Supporting Fund (CPO Fund), will be imposed by the end of this month in an effort 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.

The tax rate is reviewed every month based on monthly average prices in Jakarta; Rotterdam, the Netherlands and Kuala Lumpur, Malaysia. But since October last year, duties were cut to zero as CPO prices dipped below the reference price.

Paulus said further that the market absorption for biodiesel by Pertamina was almost zero as the company acted as the main buyer for the biodiesel, in accordance with the mandatory mix of biofuel in diesel fuel from 10 to 15 percent

The mandatory mix is part of the government'€™s solution of taming the volatility of the rupiah, as reduced oil imports will improve the country'€™s current account and in turn improve its economic fundamentals.

According to a data at the Energy Ministry, domestic absorption of biodiesel by Pertamina as of 2014 reached 2.4 million kiloliters (kl), below the targeted 3.3 million kl. This year, the government aims for 4.3 million kl of biodiesel

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