Indonesia Yet to Decide on Whether to Revise Palm Oil Export Levy, Say Officials

Indonesian authorities have yet to decide on whether to cut their crude palm oil (CPO) export levy, three officials told Reuters as the levies remained at their highest for five months in a row, hurting demand.

Indonesia, the world's top producer of the edible oil, raised CPO export levies last year to generate funds for its ambitious palm-based biodiesel program and smallholder farmer replanting scheme, at the expense of demand.

"It is still being discussed ... the export levy needs a review," Joko Supriyono, a member of the supervisory board of BPDP, the government body in charge of subsidizing palm oil programs, told Reuters.

"[We need to] consider market dynamics but also sustainably support the biodiesel program and replanting program," he added.

Musdhalifah Machmud, deputy minister of food and agriculture, told Reuters that authorities routinely review the levy but no decisions about cutting levies have been made yet.

Abdul Rochim, director general of the industry ministry said the issue was being debated but nothing had been decided.

The levy was raised from a flat rate of US$55 per ton to a price-dependent, progressive system of US$55-US$255 per ton. For June, it was set at US$255 for the fifth successive month.

Analysts, traders and trade groups have warned that higher tariffs could impact demand for the versatile oil as consumers look at cheaper alternatives, while farmers say that higher levies lower prices for their fresh fruit bunches.

But Indonesia's biodiesel policy, where it is mandatory for diesel to be blended with 30% bio content from palm, has helped the country sop up excess supply of palm and has supported prices.

Downstream sector industry groups showed support for a higher levy for palm oil, which is widely found in consumer products, saying it guaranteed supply and higher value-added palm oil shipments.

Indonesia's CPO exports rose 18.7% in March year-on-year, the country's palm oil association (GAPKI) reported last month. GAPKI has not released data for the subsequent months.