INDONESIA LOWERS LEVIES
World’s top exporter sets US$570 price threshold in bid to boost competitiveness
INDONESIA has eased rules on palm oil levies and derivative products following a drop in prices, according to a finance ministry regulation on a government website yesterday, an effort to make the nation’s palm oil exports more competitive.
The world’s top exporter of palm oil will not collect levies from palm exporters when prices are below a threshold of US$570 (RM2,366) per tonne, but will charge US$10 to US$25 a tonne once prices are in a range of US$570 to US$619 per tonne. The levy will rise to US$20 to US$50 when prices hit above US$619 per tonne.
Under the previous rules for levies, exporters paid US$20 to US$50 per tonne regardless of palm price levels.
The government expects that by lowering the levies, Indonesian exporters can set more competitive prices for palm oil shipments, and that in turn will help local palm farmers.
Indonesia also imposes export taxes on crude palm oil when the reference price is above US$750 per tonne. The rules on the export taxes remain unchanged.
The details of the new regulation were different from those announced last week.
Darmin Nasution, coordinating minister for economic affairs, earlier said the zero levy was implemented when prices were below US$500 per tonne.
Asked about the difference in price thresholds, Darmin said it was due to the adoption of the trade ministry’s reference price for the regulation.
The government will use the trade ministry’s monthly reference price in deciding the levy, according to the regulation signed on Tuesday. The monthly reference price is set based on palm prices in Indonesia, Malaysia and Rotterdam.
Darmin said higher crude palm oil prices in Rotterdam meant the government had to increase the floor price for exports to be imposed with levies.
The trade ministry’s reference price for this month stood at US$549.37 per tonne. In comparison, palm oil benchmark contracts in Kuala Lumpur were trading around RM2,000 per tonne yesterday.
Indonesia collects levies from palm exporters to help finance the development of its palmbased biodiesel programme and fund replanting.
The palm benchmark in Malaysia hit its lowest since August 2015 last week, as stocks of the vegetable oil continue to remain elevated amid soft global demands.
“This is a good move (for Indonesia) but bad for Malaysia as we need to compete with them,” said David Ng, derivatives specialist at Phillip Futures in Kuala Lumpur.
“Indonesian crude palm oil is now priced more competitively,” he added.