No imminent change in CPO export tax

JAKARTA (JP): The government has no immediate plan to reduce export taxes on crude palm oil (CPO) and its derivatives despite a drop in international prices.

Minister of Industry and Trade Rahardi Ramelan said on Thursday the 40 percent export taxes on palm oil products would remain in place at least until May.

"For now, I will not lower the taxes at least for the next two months," Rahardi said.

Rahardi said he feared the price of cooking oil, the refined byproduct of CPO, would rise sharply if the government lowered the taxes.

"Rumors the government would reduce the tax have been spreading in the market, causing higher prices of CPO and cooking oil in the domestic market. But I reiterate, do not expect any cuts in CPO export tax."

He said the government would not increase the export tax until CPO production is sufficient to meet demand.

"If our CPO production increases sharply, perhaps to 7 million or 8 million tons, then we do not have to worry about lowering the export tax," he said, adding that the country's CPO production is expected to surpass 6 million tons this year.

The government imposed an export tax on CPO products last year to curb the surge in cooking oil prices on the domestic market.

Exporting has become an attractive option for producers since the rupiah dropped sharply in value against the U.S. dollar.

The rupiah currently trades between Rp 8,000 and Rp 9,000 against the greenback, compared to its precrisis level of Rp 2,450 in July 1997.

Most CPO producers export their products which has led to short supplies on the domestic market. As a result, the price of cooking oil has increased sharply.

In February, the government slashed the export tax on CPO, palm oil kernels and crude palm olein, to 40 percent each from 60 percent. It also lowered the export tax of refined bleached deodorized (RBD) palm oil and RBD palm olein to 32 percent each from 55 percent.

Many CPO producers have called on the government to further cut the tax. Rahardi instead lowered basic export prices of CPO and its byproducts last month, to match declining CPO prices on the international market and the strengthening of the rupiah's value against the U.S. dollar.

Prices are determined every month for calculation of the export tax payment, he said.

The basic export CPO price starting March 2 to March 31 was lowered to US$430 per ton this month from $535 in January, Rahardi said.

He said CPO prices on the international market were dropping due to the use of cheaper vegetable oils such as soybean and canola. (gis)