Indonesia cuts duty on palm oil to boost exports

Indonesia has lowered its export duty on palm oil in an effort to boost export shipments. The world’s largest palm oil producer set a levy on crude palm oil at 7.5 percent of the base price, according to a decree posted on the finance ministry’s website. The new rule, effective Sept. 21, will reduce the duty on oil exports to $63 per ton from $90 in September. The levy on processed palm products will be between 3% and 6%.

The benchmark price for palm oil in September was set at $839.53 per ton, up from $820.11 in August. The total export duty was set at $142 per ton in September compared to $118 per ton in August.

The changes are expected by analysts to help the southeast Asian country become more competitive with neighboring Malaysia, the second-largest palm kernel oil producer. That could add pressure on palm oil futures, which have fallen more than 10 percent in Kuala Lumpur from a high in April.

Indonesia levies an export tax and a surcharge on palm oil exports. The levy, which is used to fund oil palm replanting programs and provide subsidies for biodiesel, was previously set monthly in U.S. dollars. The prime rate in calculating the duty is a weighted average price based on the value of palm oil and is set monthly by the Ministry of Trade to calculate export duties.

Earlier it became known that Indonesia may face a 30% reduction in palm oil exports due to the adoption of the new EU law on deforestation (EUDR).

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Tags: Indonesia, palm oil