28/09/04 NEW DELHI (Dow Jones)--Indonesia's exports of palm oil to Indiacould rise marginally next year given that India's edible oil output mayfall because of a smaller oilseeds harvest, an Indonesian industryofficial told Dow Jones Newswires.

"Indonesia's total palm oil exports to India may increase to 1.9 million-2million metric tons from around 1.8 million tons in 2004," Derom Bangun,chairman of the Indonesian Palm Oil Producers Association, or Gapki, saidin an interview.

However, Bangun said exports to India still won't reach the 2.2 milliontons exported in 2003.

Indonesia's crude palm oil exports to India have been hit by the Indiangovernment's notification in August 2003 demanding that imported CPOshipments have a carotenoid level of at least 500 milligrams a kilogram.Industry observers say it is impossible to find such high carotenoidlevels in imported shipments.

Carotenoid is an orange colored pigment that imparts CPO its color.

The government treats any CPO shipment with less than 500 mg/kg ofcarotenoid as refined palm oil and charges a 75% import duty. The importduty for CPO is 65%.

Bangun said in August and September 2003, after the notification wasissued, that CPO shipments to India fell dramatically. However, there isnow "greater understanding" between Indian and Indonesian traders.

"Traders in Indonesia realized they will have to cover a part of the costof the higher import duty for CPO shipments to India. This has made manyIndonesian traders offer discounts to Indian buyers," said Bangun.

He added that despite these measures, Indonesia's CPO shipments haven'tbeen able to reach 2003 levels this year, nor are they expected to do sonext year.

Indian Exporters Seek More Refined Palm Olein Imports

"Indian exporters now want to import more refined palm olein, since thereare no carotenoid issues involved. So, Indonesian traders are also sellingmore refined palm olein to India," said Bangun.

Bangun said while Indonesia has a refining capacity of 8 million metrictons a year, the capacity is underutilized to a large extent.

"Most traders find the CPO market quite lucrative, which means we sellmore CPO than refined oils," said Bangun.

However, he added that Indonesia was gearing up to sell more refined palmoil with new capacity additions at refineries.

Speaking about the outlook on palm oil prices, Bangun said CPO prices mayrise in the next three months, as Indonesian demand will rise because ofthe Islamic holy month of Ramadan that begins Oct. 15, which will alsoreduce the availability of oil for export.

"Global CPO prices may rise in the short term, as Indonesian supplies mayfall at a time when local demand is high," said Bangun.

Indonesia is the world's largest supplier of CPO.

Indonesia's 2005 Palm Oil Output Expected To Rise 7.4% On Year

Speaking about Indonesia's palm oil output in 2005, Bangun said he expectsit touch 11.6 million metric tons, a 7.4% growth over the productionestimated for this year.

"The 2005 output is expected to rise because of two reasons. Firstly,there are additional areas under mature oil palm trees and increase inproductivity of already mature trees because of better expected use offarm inputs and secondly, due to more professional management of the oilpalm cultivation process."

Bangun added that Indonesia's palm oil output for this year has beenrevised upward. While 2004 palm oil output was earlier estimated at 10.4million tons, it is now estimated to reach 10.8 million tons.

He said at the beginning of 2004, Gapki estimated output of 10.4 milliontons, expecting normal weather conditions. But the weather turned out tobe exceptionally good, with rains evenly distributed across the country,leading to an upward revision of palm oil output.