T

he government launched on Monday a special public service agency (BLU) in charge of a new levy on exports of palm oil to support development of the commodity.

The special agency will act as a collector and manager of the levy, called the Crude Palm Oil Supporting Fund (CPO Fund), which will be used to develop the palm oil industry and pay for biodiesel subsidies in Indonesia, the world'€™s largest palm oil producer.

'€œThe special agency will start operating on July 1 under the management of six directors. We are currently preparing appointments to the board of directors that will be completed next week,'€ Coordinating Economic Minister Sofyan Djalil said in a press conference.

 The government has appointed Bayu Krisnamurthi and Yuniar Yanuar Rasyid as the agency'€™s president director and finance director, respectively. Bayu was deputy trade minister during the administration of then president Susilo Bambang Yudhoyono, while Yuniar is director of accounting and financial reporting at the Finance Ministry'€™s treasury directorate general.

The remaining four people on the board of directors will be appointed by the agency'€™s board of commissioners chairman Rusman Heriawan, who was deputy agriculture minister in the Yudhoyono administration.

The board of commissioners, Sofyan said, would report directly to Finance Minister Bambang Brodjonegoro, while Sofyan himself would act as the chairman of the agency'€™s advisory board, which would be composed of other ministers and practitioners, including Agriculture Minister Amran Sulaiman, Industry Minister Saleh Husin and Energy and Mineral Resources Minister Sudirman Said, as well as palm oil practitioners such as Theodore P. Rachmat, Prijono Sugiarto and Mahendra Siregar and the palm oil industry association to represent farmers.

'€œThe supervisory board will advise the special agency on how to use the fund to further the country'€™s palm oil industry, including sustainable development of the commodity,'€ Sofyan said.

The new body, Sofyan went on, would have a mechanism similar to an asset management company, managing the CPO Fund through a custody bank in order to seek return on investment based on good corporate governance principals, including the appointment of a surveyor to monitor the practice.

The levy imposed on palm oil exporters will vary between US$30 to $50 per ton of CPO and CPO-products regulated, according to a Finance Ministry regulation. The rule will impose a maximum levy of $50 per ton of CPO on upstream industries, while downstream industries will be charged lower rates.

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.

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, which aims to boost domestic consumption of the more environmentally friendly fuel and reduce dependence on oil imports.

'€œThis fund is part of the government'€™s policy package announced earlier this year to reduce the country'€™s current account deficit, which has surged due to fossil fuel imports,'€ Finance Minister Bambang Brodjonegoro said, pointing out that the majority portion of the CPO Fund would be used to pay biodiesel subsidies.