28/03/2008 (ICIS News), Singapore - Indonesia will double the taxes slapped on crude palm oil (CPO) exports in April to curb inflation, but oleochemical makers were cautiously optimistic that this would increase local feedstock supply and lower prices, industry sources said on Friday.

CPO export taxes would be raised to 20% with effect from 1 April in order to curb further price rises in domestic cooking oil values, Zafrullah, assistant deputy director of the country’s Department of Industry and Trade, said in an interview with ICIS.

The base price of CPO would also be increased to $1,196/tonne at the same time, up from $988/tonne this month, he said.

"We are increasing the tax because of the high domestic prices [for cooking oil]," he said, adding that this would discourage exports and increase supply in the local market.

CPO is used in as feedstock for a variety of food, biodiesel, cosmetic and pharmaceutical industries.

Indonesia is the largest CPO producer in the world and the domestic cooking oil shortages have been blamed on palm plantation owners who export the bulk of their production.

There has been strong inflationary pressure on cooking oil due to the recent bullishness in vegetable oil numbers on the back of a global surge in commodity prices and increased buying interest from India and China, traders said.

Indonesian consumers of CPO in downstream oleochemical industries were cautiously optimistic about the news.

The recent volatility in vegetable oil values had made it very difficult to do business, a marketing official at an Indonesian fatty acids plant said.

"Even though we should be able to get some discounts on raw material from local suppliers [after the taxes are implemented], it is still too early to see the effects of the increase in export taxes," he added.

Benchmark CPO futures for June delivery on Bursa Malaysia were at ringgit (M$) 3,582/tonne ($1,116/tonne) on Friday at 11:55 local time (3:55 GMT), 75% higher than the same period in 2007.

Major fatty acid producers in Asia include IOI Oleochemical, Kuala Lumpur Kepong, Musim Mas, Natural Oleochemicals and Cognis Oleochemicals.