Jakarta. Indonesian President Joko Widodo has signed a regulation requiring exporters to pay a levy of $50 per tonne of crude palm oil (CPO) and $30 for processed palm oil product shipments, officials said on Wednesday.

The regulation, which was announced in late March, will fund Indonesia’s recently announced biodiesel subsidies and could underpin palm prices if biodiesel demand picks up.

“CPO supporting fund was signed by the president last night,” Rida Mulyana, director general of renewable energy at the energy ministry, told reporters. “The threshhold for export tax is unchanged.”

Chief Economic Minister Sofyan Djalil told Reuters the levy would be implemented by the third week of May at the latest.

Benchmark palm prices fell nearly 15 percent last year and currently trade at 2,194 ringgit ($614) per tonne.

Indonesia will levy $50 on every tonne of CPO shipped at a zero export tax rate. When CPO prices drop below $750 a tonne on an average, the world’s top producer of the tropical oil cuts the monthly tax on its CPO exports to zero.

Indonesia has set the CPO export tax for April at zero, unchanged since October 2014. The tax rises to a maximum of 22.5 percent, depending on how far above $750 average prices climb.

In actions that would help boost palm oil demand and reduce costly gasoline imports, Indonesia hiked biodiesel subsidies and increased the minimum bio content in diesel fuel this year.

Biodiesel consumption this year is expected to be lower than targeted since the new regulation took so long to implement. Consumption is expected at 3.5 million kilolitres in 2015, down from an initial target of 5.3 million.

Before the recent changes, Indonesia’s CPO production was seen rising 7 percent 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 Sinar Mas Agro Resources and Technology, Malaysia’s Sime Darby and Singapore-based Wilmar International.

Indonesia also plans to reduce its CPO export tax to help offset the cost to companies of imposing the export levies, a senior Finance Ministry official has said.

Reuters

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