[The Jakarta Post] Palm-oil levy could be extended to rubber, coffee

Satria Sambijantoro and Linda Yulisman, The Jakarta Post, Jakarta | Business | Tue, April 07 2015, 7:45 AM
Indonesia is considering extending the imposition of export levies for palm oil to other commodities such as rubber and coffee, in an effort to boost the country’s domestic agriculture industry.
“The export levy could also be applied to rubber, coffee and other commodities, depending on the situation,” Gamal Nasir, the Agriculture Ministry’s director general for plantations, said on Monday.
“However, for now, it will be for crude palm oil [CPO] first,” he said after a meeting with top officials at the Office of the Coordinating Economic Minister.
The government has revealed a plan to introduce export levies for palm-oil exporters that will be used primarily to fund the government’s biodiesel program — intended to lower fossil-fuel imports and reduce the country’s current-account deficit — as well as for replanting and research programs in local plantations.
Under the government’s plan, palm-oil exporters would be levied US$50 per metric ton for CPO shipments and $30 for processed palm-oil products.
The government will keep imposing other taxes on CPO shipments when prices exceed $750 a ton, with the tax rates ranging between 7.5 percent and 22.5 percent for higher prices.
Palm-oil prices have soared following the Indonesian government’s export levy plan, with the commodity’s futures climbing 1.8 percent to $614 per ton, the strongest level in almost a month, on the Bursa Malaysia Derivatives in Kuala Lumpur on Monday, Bloomberg reported.
In a research note distributed on Sunday evening, analysts from CIMB Group estimated that the palm-oil exports levy policy could provide the government with at least $885 million of additional revenue and could potentially subsidize 2.5 million tons of biodiesel at Rp 4,000 per liter.
Coordinating Economic Minister Sofyan Djalil estimated the levy plan would generate approximately
Rp 5 trillion to 7 trillion of funds. The government’s biodiesel subsidies program might need at least
Rp 5 trillion, he said on Monday.
He confirmed the plan to impose the levy on other commodities such as rubber and coffee, but added that the government would not implement the policy hastily.
“If this one succeeds, then we could implement the same thing for rubber,” Sofyan said after the meeting.
“But, the nature of businesses is really different [between the two industries]. Implementing it for crude palm oil, for example, may be easier as there would be no problem if we implemented a $50 levy there,” he noted.
Gandi Sulistiyanto, the managing director of major palm-oil producer Sinar Mas Group, said that the industry welcomed the government’s measure to charge export levies, which would be pooled as a fund by a steering committee supervised by a board consisting of government and business players.
“The fund is a support from the upstream industry to the downstream industry, particularly the biodiesel industry,” he said.
Major palm-oil producers estimated that the rising consumption of CPO for biofuel blending would not affect the supply of cooking oil domestically.
In February, the government increased the biofuel subsidy to Rp 4,000 per liter from the previous Rp 1,500. Beginning in April, the content of mandatory biofuel for diesel blending has also been increased to 15 percent from 10 percent.
“The CPO supply allocated for biodiesel will derive from excess output which up to the present is exported,” producers, including Wilmar, Sinar Mas and Musim Mas, among others, said in a statement.
Domestic palm-oil consumption will total 10 million tons this year, half of which is to be used for biodiesel, according to Trade Minister Rachmat Gobel.

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