Oils & Fats International (22/05/2025) - The Indonesian government has increased the export tax on crude palm oil (CPO) from 7.5% to 10% of the reference price on 17 May in a bid to fund its biofuel programme and replanting efforts, Asia News Network wrote.

The world’s largest palm oil producer had also increased taxes for outbound shipments of other palm oil products, according to the 16 May report.

The new tariff was published by the finance ministry on 14 May, the Indonesian Palm Oil Association (GAPKI) reported on 20 May.

Indonesia was heavily subsidising biodiesel to meet its mandatory 40% biodiesel (B40) policy targets and was using export taxes to fund the programme, the Asia News Network report said.

Commenting on the increased CPO export tax, GAPKI chairman Eddy Martono said it would make Indonesian palm oil less competitive globally.

“Previously, our palm oil industry has been subjected to three export burdens – the Domestic Market Obligation (DMO), export levy (PE) and export tax (BK). The total financial burden borne by the palm oil industry has already reached US$221/tonne. With the new tariff, our burden will certainly increase … but we have yet to make a new calculation.”

The increased tariff will also impact the welfare of smallholders who are affected by price fluctuations of fresh fruit bunches (FFB), according to Martono.

“The decrease in CPO prices at the domestic market will reduce the income of smallholders,” he added.

Considering the potential impacts, GAPKI said it had formally sent a letter to Finance Minister Mulyani Indrawati, asking for the government to delay the implementation of the new palm oil export tax.

“Increasing the palm oil export levy amid the uncertain end of the trade war between USA and China, and the ongoing geopolitical tensions in a number of regions will further weaken the competitiveness of Indonesia’s palm oil products,” GAPKI said in the letter.

A spokesperson from the Public Service Agency for Plantation Fund Management (BLU BPDP) said that GAPKI’s request would be discussed by related ministries.

At the time of the report, there had been no response from the ministry of finance and the economic coordinating ministry, GAPKI said.

Introduced in January, Indonesia’s B40 policy, which requires approximately 15.62M kilolitres of CPO, came against a backdrop of reduced CPO production in the country from 50.1M tonnes in 2023 to 47.8M tonnes in 2024, according to GAPKI.

The palm oil industry group also anticipated that B40 implementation could reduce CPO exports by 2M tonnes, Asia News Network wrote.

Read more at https://www.ofimagazine.com/news/indonesia-increases-cpo-export-tax-from-7-5-to-10