Indonesia’s 10% levy could cause CPO exports to plummet

The Indonesian Palm Oil Association (Gapki) has warned that a plan to increase the levy on crude palm oil (CPO) exports to 10% next year could render local producers less competitive in the international market.

The government currently imposes a 7.5% levy on CPO exports, while a lower rate of between 3 and 6% of the reference price applies to refined palm oil products.

“Increasing the export levy will make Indonesian palm oil (exports) less competitive compared to neighbouring countries,” Gapki chairman Eddy Martono said on Sunday, as quoted by Bloomberg Technoz.

Coordinating Economic Minister Airlangga Hartarto said on Dec 19 that increasing the CPO export levy would help the government push forward with its mandatory 40% palm oil-based biodiesel (B40) programme, which starts in January.

He added that the levy would be implemented once the Finance Ministry had issued the relevant regulation, Reuters reported. The biodiesel programme aims to reduce the country’s reliance on imported diesel while ramping up demand for domestically produced vegetable oils.

The government trialed the B40 biofuel in July to power trains, as well as cars and trucks using the currently available B35 biodiesel blend.

However, businesses are concerned that the upgraded biodiesel programme, coupled with a higher levy, would lower the overall volume of CPO exports, especially amid stagnant domestic production.

Tags: biofuel, levy, CPO, refined palm oil products, exports, Crude palm oil, GAPKI, Indonesian Palm Oil Association