Rahardi Ramelan says CPO export taxes remain in force

JAKARTA (JP): The government is retaining high export taxes on crude palm oil (CPO) and its derivatives despite a significant decline in domestic prices in recent weeks.

Minister of Trade and Industry Rahardi Ramelan said on Monday the 60 percent export taxes on the palm oil products would likely remain until at least next January.

"The export taxes are fixed, it will not be changed," Rahardi told reporters.

In June, the government imposed export taxes of up to 60 percent on CPO and its derivatives to discourage exports.

The ministry has lowered the basic export prices of CPO and its by-products this month to match the declining trend of the CPO prices in the international market and the strengthening of the rupiah's value against the U.S. dollar.

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

The basic export price of CPO starting Oct. 9 to Nov. 8 were lowered to US$595 per ton this month from $630 in September, Rahardi said.

Rahardi said the domestic supply of CPO, the main material for the production of cooking oil, had increased significantly in the last several weeks following the government's move last month to cut the subsidy on the sales of the commodity at home.

The government previously controlled the cooking oil distribution through the State Logistics Agency (Bulog), which sold the cooking oil at a subsidized price of Rp 4,000 per kilogram. But the market price was far higher at between Rp 6,000 to Rp 7,500 per kilogram as Bulog's supply was too small to affect the prices. Many producers benefited from the market situation by hoarding their stocks to keep the price at a high level.

The subsidy was removed last month, and the government handed over the task of distributing cooking oil to the Indonesian Distribution Cooperatives (KDI), with Bulog's assistance, until the end of this year.

Removal of the subsidy should have theoretically pushed up the prices, but the government's move last month instead caused the price to drop.

According to a government official, the price cut was possible not only due to an increase in the domestic supply, but because speculators no longer dared to keep their cooking oil stocks.

Prices of cooking oil sold by non-KDI members were even much lower than those marketed through the KDI network in the past several weeks. The price difference caused public consternation, especially after Rahardi said non-KDI members had dumped their stocks on the market to eliminate KDI's role in the sales of the cooking oil.

KDI members, which buy their stocks through state-owned cooking oil producers, sold the edible oil at Rp 5,000 per kilogram, while non-KDI members sold their supply at much lower prices. This caused big losses to KDI members.

KDI has removed the price ceiling and adjusts the price according to the market situation.

At Monday's media conference, Rahardi retracted his earlier comment over dumping on the market, and added that the losses suffered by KDI were much lower than the amount of money the government spent to subsidize the cooking oil. (das)