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Indonesia imposes higher export levies amid year-end rally in global CPO prices
The progressive export levy on CPO is expected to increase biodiesel consumption in 2021 by easing the subsidy burden.
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Bunches of harvested palm fruit lie in the shade beneath oil palms at an unidentified plantation in this undated stock photograph. (Shutterstock/mrfiza)
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ndonesia, the world’s top palm oil producer, is to impose higher export levies on crude palm oil (CPO) starting Thursday as the price of the commodity rallies ahead of the year-end. The policy also aims to support the government’s mandatory biodiesel program.
The recently issued Finance Ministerial Regulation No. 191/2020 imposes progressive export levies ranging from US$55 to $255 per metric ton of CPO depending on the reference price. In comparison, the previous regulation imposed a flat CPO levy of $55 per metric ton, regardless of price.
So under the new regulation, a $55 per metric ton will be imposed if the CPO reference price is $670 per metric ton or below, with the levy increasing between $5 and $15 for every $25 hike per metric ton of CPO.
Food and agribusiness coordination deputy Musdhalifah Machmud at the Office of the Coordinating Economic Minister said the new policy aimed to improve the plantation revitalization programs and to support the government’s 30 percent palm oil biodiesel (B30) program. She added that the policy would be evaluated every month to adjust to economic conditions.
“All parties are expected to support the government’s policy because every policy regarding palm oil aims to make it sustainable, given its crucial role in the national economy,” Musdhalifah said on Wednesday.
The policy enters into force on Dec. 10, one day after global CPO prices rallied on Wednesday to close at 3,636 ringgit ($894.80) per metric ton, after reaching the lowest price of the year in May at 2,000 ringgit per metric ton as the coronavirus pandemic sent shockwaves throughout the commodity market.
The Indonesian Oil Palm Association (Gapki) stated earlier that domestic consumption would drive demand growth for Indonesian palm oil this year as exports fell during the pandemic, while domestic demand would be propelled mainly by the B30 program.
