25/03/2008 (The Financial Express) -  Indonesia, the world's biggest palm oil producer, will double the tax on exports of the vegetable oil next month, in a bid to ensure domestic supplies are adequate.

The rate on crude palm oil shipments will be raised to 20%, Erfandi Tabrani, a director for agricultural exports at the trade ministry, said on Tuesday.

Record raw-material prices have stoked inflation globally, prompting governments to stockpile, restrict exports, and import to safeguard supplies. While India has curbed overseas sales of wheat, rice, and edible oils, South Korea said on Tuesday, it will end import tariffs on corn and milling wheat to cool food prices.

Palm oil futures in Malaysia, a global benchmark, had their biggest gain in three weeks on concern, the doubling in the export tax may curb supply, even as demand rises in China and India, the world's biggest buyers of vegetable oils. The contract for June delivery rose 4.8% to 3,500 ringgit a metric tonne ($1,095) on the Malaysia Derivatives Exchange.

The price climbed 75% in the past year and reached a record 4,486 ringgit a tonne on March 4.

Indonesia, which is also considering a policy to discourage rice exports, will raise next month's base price for calculating tax on exports of crude palm oil to $1,196 on April 1 from $988 a tonne this month, Erfandi said.

The Indonesian government last month announced revised tax rates for palm oil exports. Previously, shipments of crude palm oil were taxed on a scale linked to global prices that peaked at 10%. Under the new plan, the levy will be raised in stages to 20%, if prices exceed $1,200 a tonne, and at a maximum rate of 25% if prices exceed $1,300 a tonne.

—Bloomberg