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Time to review biodiesel policy amid skyrocketing crude, palm oil prices
With the backlash over the latest revelations from the BPDPKS on how the surcharge funds on palm oil exports were channeled, it is clear that a comprehensive and integrated policy on CPO and biodiesels is urgently needed.
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A woman and two children ride a motorbike on March 27, 2019 through a palm oil plantation in Meulaboh, Aceh. (AFP/Chaideer Mahyuddin)
Controversy has never ceased over the palm oil industry. It induces either extreme love or hate.
It is loved by Indonesian smallholder growers and big plantations for its productivity, cost effectiveness and product versatility, especially as global palm oil prices have more than doubled over the last two years.
But the commodity has been incessantly attacked in Europe and the United States through boycott campaigns, which allege that oil palm estates are responsible for massive deforestation in Indonesia and create unfair competition against other vegetable oils from developed countries.
At home, the industry has been slammed over the last three months by consumer organizations for alleged cartel-like practices in the cooking oil market and even investigated by the antitrust agency (KPPU) over possible abuse of market power by the largest producers.
Long lines of consumers looking to buy cooking oil at the government-set retail price of between Rp 11,500 (80 US cents) and Rp 14,000 per kilogram have been common sights in many cities, despite the draconian government policy of imposing a domestic market obligation (DMO) of 30 percent of the export volume on crude palm oil (CPO) producers.
The DMO requires CPO producers to sell the commodity at a fixed price of Rp 9,300/kg, less than half the free market price of $1/kg. The price for DMO olein is fixed at Rp 10,300/kg.
The big question, though, is why the government is still unable to control cooking oil prices at its retail price range, when the palm oil industry association has claimed that household and industrial cooking oil consumption only amounted to 9 million tons of the 56 million-ton national CPO output in 2021.
