05 June 2020

As of June 1, 2020, the government through the Ministry of Finance (MoF) has set an export levy on crude palm oil (CPO) and its derivative products. This is stated in the Minister of Finance Regulation (PMK) number 57/PMK.05/2020 concerning the General Service Tariff of the Palm Oil Plantation Management Agency.

The government's plan to withdraw CPO export tariffs, said President Director of PT Mahkota Group Tbk (MGRO), Usli Sarsi, should have been carried out earlier in 2019 based on PMK number 23 of 2019 on CPO export levies and their derivatives which took effect on January 1, 2020.​

When comparing the CPO export tariff of PMK number 57/PMK.05/2020 with PMK number 23 of 2019, there was an increase from USD 50 per ton to USD 55 per ton.

The cancellation of the increase in CPO export tariffs in early 2020 was because in 2019 CPO prices fell due to China's trade war with the United States plus European countries' rejection of the palm oil industry on the grounds that Indonesian palm oil is not environmentally friendly.

To prevent palm oil prices from falling dramatically, the government is providing relaxation by not collecting CPO export taxes. “If the government now applies CPO export tariffs, it is quite reasonable considering that palm oil prices are already better than in 2019,” Usli Sarsi said on Wednesday (3/6).

Currently, CPO prices are above YMR2,200 per ton. With this price, the tax rate set by the government, Usli said, is not too burdensome. Although CPO prices have improved considerably, he admitted that the revenue of the CPO industry has decreased this year.

This is because the demand for Indonesia's CPO export destination countries has decreased. Fortunately, Usli continued, the palm oil industry was not greatly affected by the Covid-19 pandemic, so it is still running. Even if there is an impact, it has very little effect. This is because processed palm oil products are needed. Especially now that the need for soap during the Covid-19 pandemic is very much used. While the material for making soap from palm oil. Unlike other industrial sectors such as hospitality, tourism, property and so on, it has a big impact so that it is forced to lay off all employees and even layoffs.

Facing the peak harvest, Usli estimates that the price of Fresh Fruit Bunches (FFB) at the farm level will decline again. This is because the availability of stockpile tanks owned by the palm oil industry in Indonesia is still limited. “Don't let the price of FFB happen in 2016, where the palm oil industry could not accept farmers' FFB and stopped producing because their stockpile tanks were full,” he said.

So that the price of FFB does not fall dramatically, what needs to be strengthened is the downstream industry by increasing the refinery industry, storage tanks. MGRO has done this to protect FFB prices. With the refinery factory, palm oil products can be processed into Refined Bleached Doedorizad Palm Oil (RBDPO) so that they are more durable because the acid content contained in palm oil is less. In addition, RBDPO can be processed into cooking oil and other derivatives.

In addition, the demand for RBDPO in the world is quite large. “We have just made the first export of RBDPO to Malaysia and this will continue to be increased to other countries. In the near future, we will also produce cooking oil,” he said. The more Indonesia exports RBDPO, the more FFB, including that of farmers, will be absorbed.

Usli is optimistic that the palm oil industry will slowly continue to improve and can again provide foreign exchange to the country.