10/11/2012 (Jakarta Post) - Indonesia, the world’s biggest palm oil producer, should cut tax on exports to preserve its market share and counter the impact of lower tariffs proposed by Malaysia, a growers’ group said.

Shipments to India, the world’s biggest buyer, may drop next year because of the Malaysian tax cut and as the South Asian country increases duty on imports of refined palm oil products, Susanto, head of marketing at the Indonesian Palm Oil Association, told reporters in Jakarta on Friday.

India is Indonesia’s biggest buyer, and shipments may reach about 5 million tons this year, said Susanto.

Malaysia, the second-largest palm oil producer, will cut the tax on exports of crude variety and abolish the duty-free shipments quota from Jan. 1, a move that will increase competition with Indonesia.

The tax reductions were announced on Oct. 12 after inventories in Malaysia surged to a record in September and futures slumped to a three-year low.

Indonesia last year lowered its taxes, making local crude palm oil cheaper than in Malaysia, cutting costs for refiners.

Indonesia’s Deputy Trade Minister Bayu Krisnamurthi on Friday ruled out any immediate change to the export taxes. “Option to change it is always there, but we’re trying to be consistent because that’s what the market wants,” he said in Jakarta.

Palm oil for delivery in January fell 0.9 percent to close at 2,316 ringgit ($757) a ton on the Malaysia Derivatives Exchange. Futures have fallen 27 percent this year, heading for a second annual drop.

The Indonesian association represents growers and refiners including PT Astra Agro Lestari, the biggest listed plantation company by market value, and PT Sinar Mas Agro Resources and Technology, a unit of the world’s second-biggest grower Golden Agri-Resources Ltd.

Indonesia cut the maximum duty on refined, bleached and deodorized, or RBD, palm oil to 10 percent from 23 percent last year. The rate for RBD palm olein was cut to 13 percent from 25 percent, while the highest tax for crude oil was set at 22.5 percent. The tax on CPO was cut to 9 percent this month from 13.5 percent in October, according to data compiled by Bloomberg. The duty on RBD palm olein was halved to 3 percent, while that on RBD palm oil was reduced to zero from 4 percent.