Indonesia eliminates the export tax on palm oil until August 31.

In a new effort to increase exports and reduce high inventories, Indonesia has eliminated its export levy for all palm oil products until August 31. Finance ministry officials added that the decision would not have an impact on government revenue.

 

The decision by the largest palm oil exporter in the world could further lower prices, which have already dropped by roughly 50% since late April to their lowest levels in more than a year.

 

Since the country enforced a three-week export ban through May 23 in order to lower domestic cooking oil costs, Indonesian palm oil producers have struggled with huge stockpiles.

 

Jakarta has put in place regulations on required local sales, or the domestic market obligation (DMO), to store fruit at home to be converted to cooking oil since the ban was lifted.

 

By lowering export taxes and implementing a shipment acceleration programme, it has also attempted to empty storage tanks at the same time. However, exports have remained sluggish, and businesses have placed the blame on the DMO regulations as well as issues with cargo vessel security.

 

 

Febrio Kacaribu, the ministry’s head of fiscal policy agency, told reporters on the sidelines of a G20 finance summit in Bali that the duty elimination is meant to further encourage exports.

 

‘The impact won’t be too great in the context of government revenues,’ he said.

 

The rate for the progressive palm oil export duty, according to Finance Minister Sri Mulyani Indrawati, is set between $55 and $240 per tonne for crude palm oil, depending on prices, and will go into effect on September 1.

 

Mills have had to restrict their acquisition of palm fruits due to high palm oil stockpiles. Farmers have expressed dissatisfaction at the rotting of their unsold fruit.

 

According to information released on Friday by the Indonesian Palm Oil Association (GAPKI), there were 7.23 million tonnes of crude palm oil in storage tanks at the end of May.

 

The DMO guidelines should also be repealed, GAPKI suggested, according to Eddy Martono, the organization’s secretary general, who welcomed the new measure.