Govt cancels CPO tax hike

Adianto P. Simamora, The Jakarta Post, Jakarta

The government has canceled plans to raise the export tax on crude palm oil (CPO) as local producers have pledged to provide enough of the commodity for the local cooking oil industry.

"Since CPO producers have pledged to provide a sufficient supply for the domestic market, I have canceled the plan to raise the export tax," Minister of Industry and Trade Rini MS Soewandi told Antara.

She made the statement after meeting with both the Indonesian Palm Oil Producers' Association (Gapki) and the Association of Indonesian Cooking Oil Producers (AIMMI).

Rini earlier threatened to raise the export tax on CPO if local producers did not pledge to provide a large enough supply for the local cooking oil industry.

She voiced the threat amid fears that the price of cooking oil would soar ahead of the upcoming religious festivities, including Ramadhan and Christmas, when demand for the commodity was normally on the increase. Furthermore, CPO producers are enthusiastically exporting products following the rise in the price of the commodity on the international market.

CPO is the raw material used in the production of cooking oil. The government imposes a three percent export tax on CPO.

Separately, Adi Wisoko, the secretary-general of AIMMI, told The Jakarta Post that the supply of cooking oil would be adequate for the upcoming festive season.

"People should not be worried about a lack of cooking oil for the end of year celebrations, as the supply is adequate," Adi said.

"We also don't have a problem with the supply of CPO and the price of cooking oil is also relatively stable now," Adi said.

The price of CPO has been hovering at above US$400 per ton over the past several months, compared to about $300 last year. Analysts have predicted that the commodity's price could break through the $500 mark next year.

GAPKI has repeatedly called on the government to remove the existing export tax on CPO to boost the competitiveness of local producers in export markets.

Indonesia, the world's second largest palm oil producer after Malaysia, produces about nine million tons a year, while local consumption amounts to only three million tons.

The country aims to export some 5.5 million tons this year, up from 4.9 million in 2001.

Meanwhile, Sudar SA, the director general of foreign trade affairs at the ministry, said the government would continue supervising the supply of CPO at home.

"We will increase the export duty on CPO if producers fail to supply a sufficient amount of it for local cooking oil producers," Sudar said.