MARKET DEVELOPMENT
Indonesia's zero export levy for crude palm oil deemed ineffective by farmers, producers
Indonesia's zero export levy for crude palm oil deemed ineffective by farmers, producers
27.07.2022 (english.news.cn) - JAKARTA, July 27 (Xinhua) -- Private companies and fresh fruit bunch (FFB) farmers have criticized the Indonesian government's ongoing policy to waive the crude palm oil (CPO) export levy until the end of August, saying that it contributes nothing to boosting exports and FFB prices.
It has been almost two weeks since the zero export levy policy took effect, but as of Monday, the price of FFB was still stuck at 1,200 rupiahs (0.08 U.S. dollars) per kg, according to Chairman of the Indonesian Oil Palm Farmers Association Gulat Manurung.
The price is still below expectation. Previously, Indonesia's Trade Minister Zulkifli Hasan said the policy would raise the FFB prices to at least 2,000 rupiahs (0.13 dollars).
"This is not the first time for the government to temporarily remove the CPO export levy. It happened years before. In fact, such a policy never gives benefits to the farmers. All of the farmers across the country have said they benefit nothing in terms of prices," Manurung said in a virtual discussion on Tuesday.
Starting July 15, Indonesia, the world's biggest palm oil producer, has temporarily cut the export levy for CPO to zero from 200 dollars per ton and for other palm oil products as an attempt to boost CPO exports and reduce oversupply in FFB stocks.
Finance Minister Sri Mulyani Indrawati previously said the government would impose a new levy starting Sept. 1, with the rate between 55 dollars and 240 dollars per ton for CPO, depending on prices in the global market.
The current zero levy policy would cause the country to lose around 11.5 trillion rupiahs (765 million dollars) to 16.8 trillion rupiahs (1.1 billion dollars) of state revenues, said Kabul Wijayanto, partnership director for the Indonesia Oil Palm Plantations Fund Management Agency.
According to the Indonesian Palm Oil Association, the current palm oil stocks in Indonesia had excessively reached 7 million tons.
The oversupply is believed to be caused by the temporary ban on CPO exports and its derivative products imposed by the Indonesian government in April. The ban, lifted in May, aimed to stabilize domestic prices and cooking oil shortages in the local market, but it has led to stockpiles in FFB as 70 percent of the country's palm oil production goes to the export market.
Executive Director for the Indonesian Vegetable Oil Refiners Association Sahat Sinaga said zero levy would not significantly help boost exports.
"Zero levy will not contribute to increasing exports, removing DMO will do," Sinaga said.
He referred to the country's regulation on mandatory local sales, known as domestic market obligation. Under the regulation, palm oil producers have to sell 30 percent of their total production to the local market at a government-set price to be able to secure permits for exports.
Sinaga said that many exporters found it difficult to fulfill the 30 percent obligation because they also had to compete with palm oil companies that only sell for the domestic market.
"The DMO regulation really hampers our exports. Thus, if the government really wants to boost exports, just remove this policy," Sinaga said.
Maruli Gultom, a member of the GAPKI advisory board, regretted the government's back-and-forth in changing regulations in a short time.
"This has caused a mess in market mechanisms and disturbed the export processes while also giving uncertainty to the farmers," he said.
Meanwhile, Oke Nurwan, Trade Ministry's director general for domestic trade, said that all the measures the government had taken must be based on deep considerations and things would not change easily in a short time.
"It needs time to fix the situation. We need to believe that all the mess we are facing right now is only a temporary disturbance amid the uncertain global conditions," he said.
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