Sales of crude palm oil are expected to double in October to $2 billion from the previous month due to a further cut in the export tax on the commodity to 7.5% from 10%, a senior government official said Thursday, Dow Jones reported.
The total sales figures include both exports and sales into the domestic market, where demand is gradually increasing due to a government directive to make use of biofuels by 2009, said Diah Maulida, Director General for Foreign Trade of the Trade Ministry.
"We have seen sales increase each time the export tax is cut," said Maulida.
In July, when the export tax was at 20%, Indonesia sold $600 million worth of crude palm oil, but when the export tax was slashed to 10% in September, $1 billion worth of crude palm oil was sold, she said.
"We are concerned that the current financial turmoil may put a crimp on demand (for crude palm oil). But we are hoping the directive to make biofuel use mandatory from next year will help absorb excess stocks," said Maulida.
Next year, Indonesia is expected to use 1 million to 1.5 million tons of palm oil in production of biodiesel, local reports have said, citing a government official.
In September, Indonesia said it would begin trials this month of the use of a biodiesel blend with a minimum of 1% palm oil for transportation, while industrial users would use 2.5%.
Biodiesel use will become mandatory at the start of 2009, and by 2010 palm oil-based biodiesel use will be increased to a 2.5%-3% blend for transportation and 5% for industrial users.