Jakarta. Indonesia's export levy prevents palm oil from reaping enormous profits from the rising price of crude palm oil, or CPO, plantation giant Astra Agro Lestari, a subsidiary of Indonesian automotive conglomerate Astra Indonesia warned.
"No matter the CPO price, what we earn is not that large because of the progressive levies and taxes. For [a price of] above $800 [per metric ton], we will never gain more than $620 as the rest goes to the government," Astra Agro Lestari president director Santosa told an online conference on Wednesday.
Last December, the government announced a new progressive export levy on CPO and other palm oil products. Under the new regulation, CPO levies now range from $55 to $255 per metric ton, depending on the reference price.
For each $25 per metric ton increase in CPO price, the government will add another $5 to $15 for the levy. A $55 levy applies if the reference price stands at $670 per metric ton or lower. The government will only impose the maximum $255 levy if the price is above $995 per metric ton.
According to the Trade Ministry, the reference price for CPO in February is $1,026.78 per metric ton, up 7.9 percent from the January price of $ 951.86 per metric ton.
As a result, the export duty is now at $93 per metric ton, whereas the levy is $255 per metric ton.
Still, Santosa assured Astra Agro Lestari, as a member of the Indonesian Palm Oil Association (Gapki), will continue to support the government's program.
The government first imposed the new regulation on the CPO export levy in 2015 to help fund the mandatory use of B30, a diesel fuel made of 30 percent palm oil biofuel. Santosa said the CPO price is rising thanks to the government's commitment to the B30 mandate.
"Without the B30 enforcement, supplies would flood the global vegetable oil [market], thus causing the price to decline," Santosa said.
He also remains confident in Indonesian palm oil's competitiveness in the global market regardless of the levy.
"I don't think there will be a technology in the next five years that can help other vegetable oils top the competitiveness of palm oil, based on its productivity per hectare and the produced oil," Santosa said.
Santosa highlighted the supply-demand dynamics determine the price.
"The key is in supply and demand. Levies and taxes do affect the profitability of palm oil companies, but not the competitiveness of Indonesian products in the global market," he said.
"I would not want to rely on regulations to compete [in the market] because they can change any time depending on the government's policies and the political situation in each country,"
When it comes to competitiveness, we must look at the fundamental aspect, process, technology, and human resources quality."