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Indonesia hikes palm oil export levy

Posted by Rafael Moro

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Top global palm oil exporter Indonesia has significantly raised its maximum palm oil export levy in a fresh bid to control domestic cooking oil prices, Reuters reported.

The government introduced the new measures following the failure of previous action taken to tackle rising domestic oil prices, according to the 18 March report.

Meanwhile, the government announced a policy U-turn on its move to remove export volume restrictions on palm oil products.

Taking immediate effect, the new regulation introduced higher progressive rates when the reference price for the edible oil reached at least US$1,050/tonne to a maximum levy of US$375/tonne, Reuters wrote.

Under previous rules, the maximum export levy was US$175/tonne, which was applied when the reference price reached at least US$1,000/tonne, according to the report. The new regulation did not, however, change the levy structure when the reference price was below US$1,000/tonne.

Indonesia's reference crude palm oil price for March stood at US$1,432.24/tonne, the report said.

Indonesian exporters are required to pay an export tax on palm oil shipments on top of the export levy, according to the report, with the maximum export tax currently at US$200/tonne.



The move was welcomed by industry players, with Indonesia Palm Oil Board deputy chairman Sahat Sinaga saying the levy was a more “civilised” policy for international buyers and gave them more predictably.

Joko Supriyono, chairman of the Indonesia Palm Oil Association (GAPKI), said exports were vital to absorb surplus output the local market could not consume.

Indonesia typically exports more than two-thirds of its production, according to the report.

The Indonesian government used proceeds from palm oil levies to fund programmes that included subsidising biodiesel, smallholder replanting and, more recently, subsidies for cooking oil, the report said.

Indonesian exporters are required to pay an export tax on palm oil shipments on top of the export levy. The maximum export tax is currently US$200/tonne.

Authorities had been struggling to control the domestic market for cooking oil, made from refined crude palm oil, after prices surged 40% at the start of the year due to high global prices, Reuters wrote.

Source: Oils & Fats Internacional (OFI)