Indonesia to raise export duty on crude palm oil to 10%

Indonesia plans to increase the export duty on crude palm oil (CPO) from 7.5% to 10% to finance higher subsidies for its biodiesel program. The country's chief economy minister announced this, citing the need for increased subsidies due to raising the biodiesel's content from 35% to 40%. However, the higher duty may make Indonesian exports less competitive, as noted by the chairman of the palm oil group, Eddy Martono.

Indonesia will increase export duty on crude palm oil (CPO) to 10% from the current 7.5% to finance higher subsidies for biodiesel, the country’s chief economy minister said on Thursday. The levy will be introduced after a Finance Ministry regulation is published, Eirlanggi Hartarto said. Indonesia, the world’s largest palm oil producer, collects taxes to subsidize its mandatory biodiesel program, which will increase the biofuel’s content from the current 35% to 40% (B40) from January 1. The higher concentration is expected to increase the need for subsidies. BPDPKS, the agency responsible for collecting and managing palm oil funds, estimated in November that increasing the mandatory biodiesel content to 40% would increase the required subsidy by 68%. “There will be funding from BPDPKS … First, we will increase the levy to 10%,” Eirlangga said when asked about subsidy funding. Palm oil currently costs about $400 a ton more than crude oil. Indonesia currently charges a 7.5% levy on ...