Indonesia to Assess Export Levies for Crude Palm Oil

The Indonesian government is currently considering a review of the export levy on Crude Palm Oil (CPO), which is presently set at 7.5%, according to the several media reports. Dida Gardera, Deputy of Food and Agribusiness Coordination at the Coordinating Ministry for Economic Affairs, emphasized that the review is crucial to ensure two main objectives: enhancing farmer welfare by raising Fresh Fruit Bunch (FFB) prices while ensuring the global competitiveness of CPO prices.

Speaking at a palm oil discussion held at Hotel Bidakara in South Jakarta on Monday, November 18, 2024, Dida stated that the export levy should be assessed regularly. He pointed out that Indonesia’s relatively stable domestic CPO production and export levels, combined with rising palm oil prices, indicate that the sector remains competitive in the global market. “As long as these conditions persist, we will conduct evaluations every three to six months,” Dida explained. He also acknowledged that the review could result in changes to the CPO export levy policy, although the final outcome remains uncertain.

The review is intended to strike a balance between domestic requirements, such as supporting local palm oil producers, and maintaining the financial health of the Palm Plantation Fund Management Agency (BPDPKS), which funds various initiatives to support the palm oil industry. “The result will depend on the evaluation process,” Dida noted, signaling that any changes will be made after a thorough assessment.

This consideration comes after the Indonesian government implemented a new tariff policy on September 11, 2024, which set the export levy for CPO at 7.5%, based on a reference price determined by the Trade Ministry. The new policy, detailed in Finance Minister’s Regulation Number 62/2024, took effect on September 21, 2024. It sets the export levy for palm kernels and palm kernel cake at $25 per ton, while levies for palm oil-based derivative products are set at 3%, 4.5%, or 6%, based on the reference price determined by the Ministry of Trade.

Recent data from the Central Statistics Agency (BPS) revealed a significant decline in Indonesia's CPO exports, with a 26.39% drop in August 2024 compared to the previous year. This reduction was attributed to less competitive palm oil prices and the broader economic challenges faced by the global market. As the government prepares to evaluate its levy policy, these factors, along with domestic and international market conditions, will likely influence the decision-making process on whether the export levy will remain the same or be adjusted to better serve the interests of farmers and the broader palm oil industry.