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Jakarta Post

Palm oil fund body eyes Rp 4.5 trillion in 2015

  • Grace D. Amianti

    The Jakarta Post

Jakarta   /   Wed, July 15, 2015   /  04:02 pm
Palm oil fund body eyes Rp 4.5 trillion in 2015

Bayu Krisnamurthi - JP/Wendra Ajistyatama

An organization newly launched to collect a palm oil levy will soon start operation, aiming to garner up to Rp 4.5 trillion (US$337.36 million) in funds this year to revitalize aging oil palm plantations and incentivize the domestic biodiesel industry.

The body, set up as a public service agency under the Finance Ministry, will begin charging exporters taxes on Thursday following the appointment of its full management team earlier this week.

Former deputy trade minister Bayu Krisnamurthi, who leads the agency, named the Indonesia Oil Palm Estate Fund (BPDP), said that it aimed to generate between Rp 3.5 trillion and Rp 4.5 trillion up to the end of this year from palm oil shipments, an expectation that he said was based on the optimism of exporters.

'€œAnnually we hope that the funds collected in the future will reach around Rp 9.5 trillion to Rp 10
trillion based on current exchange rates and 2014 export data,'€ Bayu said Tuesday in a press conference at the agency'€™s office.

The levies will amount to $30 per metric ton for processed palm oil and $50 per metric ton for crude palm oil (CPO) if prices fall below $750 per metric ton, according to the Finance Ministry rule that regulates the arrangement.

As its initial move, the agency plans to replant at least 2,000 hectares of oil palm plantations run by small holders in Pekanbaru and Jambi in Sumatra, with each hectare costing around Rp 60 million, according to Bayu.

The area is a part of 300,000 hectares of plantations that Indonesia, the world'€™s largest palm oil producer, has to revitalize as most of them have been operating for more than 30 years.

That will give a major boost to the small holders who manage around 42 percent of the overall 9 million hectares of oil palm plantations in Indonesia.

The next priority would be to subsidize biodiesel in a bid to help domestic consumption reach between 1.8 million and 2 million kiloliters (KL) in the next four months. A total consumption of 5.2 million KL is targeted for the whole of 2015, Bayu said, saying the incentive will amount to between Rp 600 and Rp 700 per liter.

'€œThe calculation of around Rp 600 to Rp 700 per liter is based on the price movement of CPO on top of the capped diesel fuel subsidy of Rp 1,000 per liter in the 2015 revised state budget,'€ Bayu said.

He added that Finance Ministry was also revising the current palm oil export tax rule to avoid double taxes being charged to palm oil exporters.

Domestic palm oil producers grouped under the Indonesian Palm Oil Producers Association (Gapki) have welcomed the government'€™s move to set up the special body to manage the tax, saying that the fund would bring significant benefits to the local palm oil industry, particularly farmers, as it already prepared for comprehensive regulations to support the policy.

'€œWe hope that the fund will be allocated appropriately for replanting programs in small holder plantations as well as other programs, such as research, promotion and human resources development,'€ said Gapki chairman Joko Supriyono.

Joko also expressed optimism that the measure would help push up palm oil prices in the next few months as Indonesia'€™s increased domestic consumption would reduce the total world supply.

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