Gov't Relaxes Palm Oil Levy Rules: Finance Ministry

The government has relaxed rules on palm oil levies and derivative products effective immediately, following a drop in prices, according to a finance ministry regulation issued on Wednesday. (Antara Photo/Syifa Yulinnas)

By : Bernadette Christina Munthe  | on 1:58 PM December 05, 2018
Category : Business, Commodities

Jakarta. The government has relaxed rules on palm oil levies and derivative products effective immediately, following a drop in prices, according to a finance  ministry regulation issued on Wednesday.

The world's top exporter of palm oil will not collect levies from palm exporters when prices are below a threshold of $570 per metric ton but will charge $10 to $25 a ton once prices are in a range of $570 to $619 per ton. The levy will rise to $20-$50 when prices hit above $619 per ton.

Under the previous rules, exporters paid $20 to $50 per ton regardless of palm oil price levels. The rules for export taxes remain the same.

The details of the new regulation were different from those announced last week. Coordinating Economic Affairs Minister Darmin Nasution earlier said the zero levy is implemented when prices are below $500 per ton.

The government will use the trade ministry's monthly reference price in deciding the levy, according to the regulation signed on Tuesday, which is set based on palm prices in Indonesia, Malaysia and Rotterdam.

The trade ministry's reference price for December stood at $549.37 per ton.

The government collects levies from palm exporters to help finance the development of the country's palm-based biodiesel program and fund replanting.

Darmin said last week a rapid drop in palm prices has made it "urgent" for the government to take action, especially to help palm farmers.

Palm benchmark contract in Bursa Malaysia hit its lowest level since August 2015 last week, as stocks of the vegetable oil continue to remain elevated amid soft global demands.

"This is a good move [for Indonesia] but bad for Malaysia as we need to compete with them," said David Ng, a derivatives specialist at Phillip Futures in Kuala Lumpur.

"Indonesian crude palm oil is now priced more competitively," he added.

Reuters

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