Indonesia Plans Palm Oil Export Levy to Fund Subsidy for Biofuel

Indonesia, the world’s largest palm oil producer, plans to impose export levies to fund biodiesel subsidies, replanting and research and development.

Shippers will pay a levy of $50 a metric ton on palm oil and $30 a ton on olein shipments, Coordinating Minister for Economic Affairs Sofyan Djalil told reporters on March 20.

The government kept the threshold for application of the separate export tax at $750 a ton, Djalil said. The tax has been at zero for six months because average prices have been below that level. The new levy will be paid even when the tax is at zero and will be “taken from export tax proceeds when prices are above $750,” Djalil said in Jakarta. President Joko Widodo is expected to approve the levy by the month-end, he said.

While retaining the $750 threshold, Indonesia plans to amend the export tax structure, Djalil said, without giving further details. The government more than doubled its subsidy for palm biofuel last month and will raise the blending rate to 15 percent from 10 percent in April, according to Djalil.

The nation has promoted biofuel use to help absorb rising supplies of the world’s most-traded cooking oil and to cut carbon emissions. The country boosted the mandated amount of blending in diesel to 10 percent from 7.5 percent in 2013, and ordered power plants to mix 20 percent in 2014. The government in February increased the biodiesel subsidy to 4,000 rupiah (31 U.S. cents) a liter from 1,500 rupiah.

Indonesia has kept a zero tax on most palm oil shipments for six months through March and may extend that through April because reference prices are still below the threshold, according to the Indonesian Palm Oil Association on March 18.

The country sets the duty monthly based on average prices in Jakarta, Rotterdam and Kuala Lumpur. Crude palm oil shipments attract no tax if the average is $750 or less over four weeks, with rates at 7.5 to 22.5 percent at higher prices.

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