CPO CUSTOMS TARIFF WILL INCREASE WITH A PROGRESSIVE SCHEME, HERE ARE AALI AND MGRO RESPONSES
03 November 2020
The government plans to increase export duty rates with a progressive scheme on crude palm oil (CPO) and its derivative products starting next year.
The progressive scheme causes the tax rate to increase if the number of tax objects increases and the value of the tax object increases.
Coordinating Minister for Economic Affairs Airlangga Hartanto said that the progressive export duty rate for CPO is around US$ 12.5 every US$ 25 price increase.
Meanwhile, CPO derivative products are charged US$ 10 per US$ 25 price increase. According to him, this policy aims to maintain the sustainability of palm oil programs, such as B30 and the replanting of people's palm oil.
Responding to this, President Director of PT Astra Agro Lestari Tbk (AALI) Santosa said that the policy can indeed support the B30 program, which in fact is a stabilizer of domestic CPO demand.
This is because without the B30 program, there will be a reduction in global demand or additional supply to the global market, which is estimated at 2.5 million tons-3 million tons per year.
“Of course, with such a large difference in supply and demand, it will affect the selling price level in the global market,” Santosa said when contacted by Kontan.co.id, Friday (30/10).
In other words, as domestic CPO demand increases due to the B30 program, the domestic market can increase its influence in the movement of CPO selling prices in foreign markets.
Santosa added that, for now, the policy is also the best choice compared to other options. Given, the price difference between fossil fuels and vegetable oil is currently quite large.
Therefore, to keep the B30 program going, the biofuel subsidy must be covered.
Another option to cover the B30 subsidy comes from the government budget. However, in the current condition, the government budget is prioritized for handling the pandemic and other economic stimulus.
The Corporate Secretary of PT Mahkota Group Tbk (MGRO) said that MGRO management also supports this government move.
According to him, increasing export duty rates with a progressive scheme can maintain the balance and stability of CPO and fresh fruit bunch (FFB) prices at a certain level.
In addition, if palm oil funds derived from export levies are well managed for the upstream sector, this will have a positive impact.
“The reason is that this will guarantee the sustainability of the availability of FFB raw materials for processing in the long term,” Elvi said.
Then, from a financial perspective, this policy is considered to further burden the cost side for companies serving the export market.
Even so, currently MGRO sales are still greater in the local market than exports. “MGRO hopes that the B30 program can further strengthen domestic sales,” he said.
Similarly, Santosa believes that this policy will reduce the potential profit that can be generated due to the increase in export levy costs. However, this policy is not a big problem for AALI.
This is because AALI has an opportunistic sales strategy, which means it will sell to parties that provide more profit.
AALI does not specifically target the portion of export and domestic sales. “If domestic net is better, sell domestic. If export is higher, export. This is a commodity, so we just flow,” said Santosa.'