Indonesia Plans Levy on Crude Palm Exports Instead of Tax Threshold Cut

Previously, if prices of crude palm oil fell below the threshold of $750 per ton, Indonesia would cut its tax on crude palm exports to zero. However, palm oil prices have fallen by more than a fifth over the past year, ending last week at $579 per ton. There had been questions regarding whether Indonesia would respond by lowering the threshold price or impose a new tax.

Indonesian officials are preparing a new regulation imposing a tax of $50 per ton on exports of crude palm oil shipped at the zero tax rate. The funds received will be used to fund biodiesel subsidies announced within recent weeks.

Last month Indonesia increased its biodiesel subsidies to shield the industry from falling crude palm oil prices and to reduce high-cost diesel imports. At the same time however, the minimum bio-blend rate was increased to 15% from 10% increasing the funds needed for the higher subsidies. There is talk that the government will require crude palm oil producers to allocate 15% of production for domestic use in order to secure processing supplies, however this has not been officially declared as of yet.