Minister says govt will lower CPO export tax to 40 percent

JAKARTA (JP): Minister of Industry and Trade Rahardi Ramelan announced on Thursday the current 60 percent export tax on crude palm oil (CPO) would be lowered to 40 percent on Feb. 1.

Rahardi told a meeting of about 20 representatives of the country's major palm oil producers that he had anticipated sufficient domestic supply before proposing the export tax to finance minister Bambang Subianto, who is expected to give his stamp of approval on the measure.

He warned the producers against any speculative practices which could result in a domestic shortage of cooking oil, similar to that which occurred early last year. The government banned exports of CPO and all its downstream products due to the shortage.

"I do not want to sit here again to decide on a measure you all would not like," he said.

Despite the producers' insistence, Rahardi refused to reveal the new export taxes for CPO byproducts to prevent speculation.

The chairman of the Federation of Palm Oil Producers, Derom Bangun, urged the government not to set the export tax of refined, deodorized, bleached (RBD) olein lower than 37 percent to prevent price turmoil for cooking oil in the country.

Derom said a 5 percent difference in the current 55 percent RBD export tax and the CPO's 60 percent tax had enabled cooking oil producers to sell at a higher price and, at the same time, depressed the price of CPO and oil palm kernel locally.

"If the RBD olein's export tax is 38 percent, then the price difference of olein and the CPO in the local market will be at a normal rate of about Rp 300 (3 U.S. cents) to Rp 400 compared to the about Rp 700 difference currently," he said.

Derom said the price of CPO in the European market had dropped drastically in the last three days, from $627.5 to $552.5, for February delivery.

Rahardi said the government would review the current basic export price of CPO of $535 per metric ton on Feb. 8. The basic export price is set by the government monthly to determine at which price the export tax is drawn.

He said the basic export price would play the role of stabilizing the local supply of palm oil products, and added that the government would continue to monitor the market to ensure the best policy.

"It is not our goal to keep the tax at 40 percent," he added. (das)