Indonesia Plans Levy on Crude Palm Exports Instead of Tax Threshold Cut
Jakarta. Indonesia will impose a levy of $50 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 $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 on Friday at 2,160 ringgit ($579) 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 $50 on every tonne of CPO shipped at the zero export tax rate, Sofyan Djalil told reporters, with the funds going to help pay for biodiesel subsidies announced in recent weeks.
“At any (CPO) price we will take $50 a tonne,” Sofyan Djalil said late on Friday, making clear that when the CPO export tax kicked in, the government would allocate $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 percent from 10 percent 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 percent 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 $500 and $600 a tonne.
The CPO export tax, aimed to help processing industries and secure domestic supplies, rises to a maximum of 22.5 percent, depending on how far above $750 average prices climb.
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.
Reuters
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Source: The Jakarta Globe