Indonesia's levy boosts its refined oil exports

This news is published in Jakarta Post.

JAKARTA: Indonesia government’s new policy on levies for palm oil exports has contributed to a share increase for total processed palm oil products in the country as producers cut back their crude palm oil (CPO) shipments due to higher levies. 

Indonesia Oil Palm Estate Fund or Badan Pengelola Dana Perkebunan (BPDP) president director Bayu Krisnamurthi said in Jakarta on Tuesday that the export of processed palm oil products had increased sharply following the launch of new levy policy in July.

State lender Bank Negara Indonesia (BNI) director Adi Sulistyowati (left), chats with (left to right) Indonesia Oil Palm Estate Fund (BPDP) president director Bayu Krisnamurthi, Bank Rakyat Indonesia (BRI) deputy president director Sunarso and Bank Mandiri deputy president director Sulaiman Arif Arianto at the Office of the Coordinating Economic Minister after signing a memorandum of understanding on palm oil development on Tuesday.(JP/Jerry Adiguna)

According to agency data, refined, bleached and deodorized (RBD) crude palm oil and RBD palm olein accounted for 75 per cent of total palm oil exports last month, while the share of CPO dropped to 25 per cent from about 70 per cent, previously.

BPDP, a special agency set up under the Finance Ministry, has been collecting levies on exports of palm oil, since July 16 to develop the palm oil industry and pay for biodesel subsidies.

The levies amount to US$30 per tonne for processed palm oil and US$50 per tonne for CPO, according to the Finance Ministry.

Bayu said that the agency had collected Rp 750 billion (or US$54.13 million) as of Aug. 17.

“From an industrialisation point of view, this is positive because the more processed products we produce, the more added value we get. So we don’t only export raw material,” he told the press on Tuesday.

He said that the response showed that the new levy regulation had left palm oil exports unaffected.

However, he also admitted that the trend strayed from an initial prediction that CPO exports would surpass that of processed palm oil and that the levy charge might have to be reconsidered. The body aimed to garner up to Rp 4.5 trillion from levy collection this year.

Indonesia is the world’s largest producer of palm oil, with an estimated output of over 30 million tonnes annually.

The government has pushed more usage of biodiesel this year to reduce dependence on oil imports and halt a deficit surge in the current account.

The government has estimated that the biodiesel programme could increase the domestic use of palm oil by 5 million tonnes a year and cut the fuel import bill by US$2 billion.

Money collected by BPDP will subsidise biodiesel production. The new subsidised B15 biodiesel, officially launched by state-owned gas and oil firm Pertamina two days ago, has a 15 per cent palm oil content and 85 per cent regular diesel.

For the programme, Pertamina and petroleum and chemical distributor PT AKR Corporindo have secured contract with oil palm planters to buy 339,000 kilolitres of CPO from Aug. 17 until Oct. 31. 

This year, Pertamina estimates it will buy 765,000 kilolitres of CPO this year to blend with 750,000 kilolitres for non-subsidised diesel.

With the current price, BPDP is required pay a subsidy of Rp 2,600 per liter of the subsidised biodiesel because its retail price is far below its market price. 

Bayu also said higher usage of biodiesel will firm up CPO prices and this bodes well with oil palm planters.

The use of the funds would still be dominated by the biodiesel subsidies for now, although he said that it would later be allocated for research to drive further development of the industry.

BPDP had also signed a memorandum of understanding (MoU) with PT Riset Perkebunan Nusantara to increase efficiency by providing high-quality seeds, maximising the fertiliser, as well as developing new palm oil based products such as biolubricant and biodegradable plastic.