Indonesia’s Higher Palm Oil Taxes Could Hit Demand

The introduction of higher crude palm oil (CPO) taxes in Indonesia to raise funds for the country’s palm-based biodiesel program could hit demand next year, Oil & Fats International reported citing Reuters on 3 December. Smallholder farmers had also not welcomed the higher levy which they said would only benefit larger oil producers who supplied feedstock for Indonesia’s biodiesel.  
The new regulation stipulated that if the CPO reference price was US$670/ton or less, the levy imposed would be US$55/ton.  It would increase by US$15 for every US$25 CPO price increase. In December, the CPO levy had been set at US$180/ton as the reference price had been set at around US$870, an official at the oil palm fund agency had told Reuters. The measures were seen as fundraiser to help subsidize Indonesia’s biodiesel program, which requires diesel to be blended with 30% bio content (B30) to maximize domestic use of the edible oil. A slump in fuel prices this year had made it less economical for biodiesel and longstanding plans to increase the bio content to 40% (B40) had been delayed due to funding issues, the report said.
In a related development, Indonesia looks at policy changes to save the biodiesel program, according to President director of the Estate Crop Fund Agency (BPDP) Eddy Abdurrachmanas. Plans to increase the blend to 40% had been delayed due to funding issues. “The price gap between crude palm oil and diesel widened in 2020, posing a challenge to the sustainability of the support program, especially the mandatory biodiesel program,” he said. The BPDP is the agency in charge of collecting and managing palm oil export levies. It was projected that in 2021, there would need to be a significant increase in funds, Abdurrachman said, estimating that Indonesia would consume 9.59M kilolitres of biodiesel next year.