Image: Reuters Berita 24 English - A cabinet minister revealed on Thursday that Indonesia is thinking about lowering its export tax on palm ...
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| Image: Reuters |
Berita 24 English - A cabinet minister revealed on Thursday that Indonesia is thinking about lowering its export tax on palm oil in an effort to boost exports. This comes after a prohibition intended to safeguard domestic cooking oil supply caused palm oil inventories to soar.
The largest producer of edible oil in the world has implemented a number of measures meant to boost exports after a three-week shipment restriction that ended in late May caused chaos both at home and abroad.
Senior Minister Luhut Pandjaitan said at an industry event that the government must exert more effort to quickly reduce domestic supplies and support farmers' prices for palm fruit, which have fallen since the ban.
In order for shipments to move, Luhut suggested that the export charge might need to be reduced in order to encourage companies to export. He didn't give any more information.
Indonesia had previously reduced the export duty to a maximum of $375 per tonne for the month of July, but is expected to raise the amount to $240 in August.
In order to better represent rapidly fluctuating worldwide pricing, Indonesia's trade ministry is also considering setting its export reference price every two weeks rather than monthly.
The reference price was established by the government and used to calculate the amount of export taxes. It was based on prices for palm oil in Europe, Malaysia, and Indonesia.
The export levy is at its highest level because the most recent reference price was established at more than $1,500 per tonne. When the price is set higher than that, an additional $288 per tonne export tax is additionally levied.
Due to increased production, resumed Indonesian imports, and concerns about recessions, Asian palm oil prices have fallen recently. The benchmark price for palm oil in Malaysia has decreased by 18% so far this month.
In order to make room for businesses to purchase more palm oil fruits from farmers during Indonesia's peak harvest season, the government wants to "flush out" supply of palm oil.
The "flush out" is happening, but the outcome is still not what we anticipated, according to Luhut.
The local supply of palm oil has increased to 6.2 million tonnes as a result of the prohibition, according to Sahat Sinaga, chairman of the Indonesia Palm Oil Board.
Buyers have grown sceptical of Indonesia's export policies due to their frequent changes, and exporters had trouble getting boats. He argued for reductions and noted that enterprises have paused shipments due to falling global prices and excessive export levies.
With the present export quota, he suggested 25 percent discounts for the tax and levy, noting that exports might not return to normal until late August.
Farmers have reported that some palm oil mills had stopped purchasing fruits, while others were doing so at discounted rates.
Albertus Wawan, a farmer in West Kalimantan province, shared images of a long line of stopped trucks heaped high with palm fruit, saying that farmers have had to wait days to sell goods at a mill that imposes a daily purchase quota.
