CPO producer asks for lower olein export tax

JAKARTA (JP): The government should lower the 11 percent export tax on olein to strengthen the crude palm oil (CPO) refining industry and increase the export of high value-added CPO-based products, an executive said on Monday.

Surya, the executive director of PT Musim Mas, a major CPO and cooking oil producer in North Sumatra, said during a meeting with the provincial legislature in Medan that the high export tax on olein encouraged the export of raw palm oil.

"Since CPO is subject to only a 3 percent export tax, producers prefer exporting this unrefined commodity, whose price is much lower than olein," Surya was quoted by Antara news agency as saying.

Indonesia, according to Surya, should follow the Malaysian policy of keeping the export taxes on olein and CPO at almost similar levels.

He said Malaysia designed its export tax policy to stimulate the growth of its CPO refining industry in order to produce a wider variety of higher value-added goods.

"Supported by this policy, Malaysia has succeeded in dominating the olein market in major importing countries such as India," he added.

He said the high export tax had made Indonesian olein less competitive than the Malaysian product.

"Nobody will be hurt if the Indonesian government lowers the export tax on olein. Such a measure will instead boost the refining industry, increase the procurement price of CPO from smallholders and generate larger foreign exchange earnings from exports," Surya said.

According to Surya, Indonesia, which produces approximately six million metric tons of CPO a year, exports mostly unrefined palm oil, notably to India.

India alone imports about two million tons from Indonesia, but this consists almost entirely of CPO, while the Indian olein market is dominated by Malaysia, he said.

"Indonesian olein cannot compete with Malaysian olein in the Indian market due to the high export tax, as India also imposes a 27 percent import tariff on olein," Surya said.

It is therefore imperative that the government cut the export tax on olein, Surya added.