29/10/2012 (Jakarta Globe) - The Indonesian government is planning on decreasing its export tax for crude palm oil amid declining prices for the commodity between August and September.

“The export tax will be revised by the government [due to the] declining price of crude palm oil on the international market,” Trade Minister Gita Wirjawan said on Thursday, as quoted by Antara news agency. “However, this [new export tax] will not disturb the downstream program [government support for the exportation of processed CPO] of the crude palm oil industry domestically.”

Indonesia, the world's biggest producer of CPO, has set a target to produce 23 million tons of CPO this year and expects to see production reach 40 million tons yearly by 2020.

Malaysia is a major competitor in the CPO market.

Indonesian exporters were able to offer cargoes at cheaper prices, nabbing market shares away from Malaysia and helping to lift stocks in its competitor that hit a record high of 2.48 tons in September.

However, the Malaysian government recently decided to slash its export tax from 23 percent to 4.5 to 8.5 percent.

The executive director of the Indonesian Palm Oil Association, Fadhil Hasan, said that local producers had been worried about the lower export tax imposed by the Malaysian government.

“The CPO export tax policy implemented by the Malaysian government has caused Indonesian CPO exports to India to decline,” Fadhil said. “At the moment, Indonesia has the biggest CPO market share in India at 5 million tons, while Malaysia is at 3 million tons.”

The lowest CPO export tax implemented on palm oil was 7.5 percent, when the price of the commodity hovered between $750 to $800 per ton. Meanwhile, the highest export tax placed on palm oil by Indonesia was 22.5 percent, when the price of CPO was above $1,250 per ton.

As of October, with the price of CPO between $950 to $1,000 per ton, the export tax currently stands at 13.5 percent.

Fadhil said that the new export tariff in November could reach 10.5 percent.