Indonesia Plans Levy On Crude Palm Exports Instead Of Tax Threshold Cut

Indonesia will impose a levy of US$50 (RM186) a tonne on exports of crude palm oil when prices fall below a threshold triggering a monthly tax on shipments overseas, the chief economics minister said.

When prices of crude palm oil fall below the threshold of US$750 a tonne on average, the world's top producer of the tropical oil cuts the monthly tax on its CPO exports to zero.

Benchmark Malaysian palm oil futures have fallen more than a fifth over the last year, and ended yesterday at RM2,160 per tonne.

Southeast Asia's biggest economy set its crude palm oil export tax for March at zero, unchanged since October last year.

Indonesian officials are preparing new rules for a charge of US$50 on every tonne of CPO shipped at the zero export tax rate, Sofyan Djalil said, with the funds going to help pay for biodiesel subsidies announced in recent weeks.

"At any (CPO) price we will take US$50 a tonne," he said, making clear that when the CPO export tax kicked in, the government would allocate US$50 a tonne to its biodiesel fund from the revenue earned.

The measure will go to Indonesian President Joko Widodo for approval on his March 30 return from overseas trips.

Indonesia ramped up biodiesel subsidies last month, in a bid to protect its biofuels industry against lower prices of crude and cut costly imports of diesel.

But a subsequent decision to boost the minimum bio content in diesel fuel to 15% from 10% increased the amount of funds needed to pay the subsidies for the higher volumes of biodiesel.

To secure processing supplies, Djalil said the government may also require CPO producers to allocate 15% of total output for domestic use, but gave no further details.

A major industry group this week said the government was looking to lower the threshold for the monthly export tax, to between US$500 and US$600 a tonne.

The CPO export tax, aimed to help processing industries and secure domestic supplies, rises to a maximum of 22.5%, depending on how far above US$750 average prices climb.

Before the recent changes, Indonesia's CPO production was seen rising 7% to 31.5 million tonnes, with exports falling 500,000 tonnes to 19.5 million, industry estimates show.

Major palm oil firms operating in Indonesia include PT Sinar Mas Agro Resources and Technology, Malaysia's Sime Darby and Singapore-based Wilmar International Ltd. – Reuters, March 21, 2015.]]>