07/04/2009 (The Jakarta Post) - The government plans to lower the minimum benchmark price of crude palm oil (CPO) for calculating the payment of export duty.

Agriculture and fishery deputy for the Coordinating Minister for the Economy Bayu Krisnamurthi said the planned policy would encourage palm oil producers to sell the product on the domestic market.

"There are two options under the proposed policy. First, we may lower the minimum benchmark price to US$600 per ton. The other option is to charge 1.5 percent of export duty across the board if the price is below $700 per ton," said Bayu.

"The current palm oil price is around $650 per ton with a tendency to go further up. Such a situation makes exports .. more attractive than .. the domestic market."

He said if the price soared beyond the $700 level, the government would impose a 1.5 percent to 2 percent export levy.

Currently, the government slaps export duties of 1.5 percent on CPO if the price of the commodity tops more than $700 per ton.

"Countries, such as India, apply lower import duties for palm oil. It will surely entice other producers to intensify their exports to these countries," said Bayu.

"That is why we are currently reviewing the levy policy to ensure availability for the local market."

The Indonesia Palm Oil Producer Association (GAPKI), slammed the government's proposed policy, which was deemed counter-productive for oil palm producers.

"Palm oil production will be around 20 million tons this year with the domestic market only absorbing around 5 million tons. That means we have more than 70 percent of excess supply. What are we supposed to do with it, other than to export it?" GAPKI domestic sector department head Benny Tjoeng. told The Jakarta Post.

Benny believed the current palm oil export levy was considered appropriate, and that there was no need for any revision.

"Farmers contribute around 35 percent of our production, the government should allow them to enjoy a little bit of profit rather than put an extra charge on export duties," he said.

In response to Gapki's call, Bayu said the government was fully aware of the excessive supply, and pledged to be "more flexible" in revising the export duty policy.