Malaysian oil palm planters in Indonesia to pay levy
Published on: Wednesday, July 01, 2015
Kuala Lumpur: KMalaysia planters with estates in Indonesia are bracing for export levies on palm oil that will be charged to fund the republic's biodiesel subsidies.Last week, Indonesia Finance Minister Banbang Brodjonegoro said effective today, Indonesia would collect palm oil export levies ranging from US$10 (RM37.60) to US$50 per tonne if palm oil prices fell below US$750 per tonne.The levy for crude palm oil (CPO) is US$50 per tonne, while refined products such as palm cooking oil, palm olein and biodiesel will be subjected to levies of between US$20 and US$30 per tonne.ADVERTISEMENT Indonesia Palm Oil Producers Association, or Gabungan Pegusaha Kelapa Sawit Indonesia (Gapki), said that there had been an increase in palm oil shipments out of Indonesia in the past couple of months as exporters had anticipated the implementation of the levies.In a telephone interview from Jakarta, Gapki executive director Fadhil Hasan said all members, including Malaysian investors, were aware of the policy and the justification for the levies."The short-term effect will be burdensome for oil palm planters but we should look at the impact on the longer term. This levy will mainly go to the biodiesel subsidies. It will reduce Indonesia's oil imports and, hopefully provide support to palm oil prices."CIMB Investment Bank regional plantations research head Ivy Ng said the levies would impact Malaysia planters with estates in Indonesia, Such as Sime Darby Bhd, Kuala Lumpur Kepong Bhd, IOI Corp Bhd and Genting Plantations Bhd.ADVERTISEMENT The move is "neutral" on integrated palm oil players such as PT Salim Invomas Pratama, Golden Agri-Resources Ltd and First Resources Ltd.It is short term "negative" for pure upstream Indonesian planters such as PT Astra Agro Lestari TBK, PT PP London Sumatra Indonesia Tbk, PT Eagle High Plantations Tbk and PT Sumber Air Mas Pratama.
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"This policy is medium-term 'positive" for CPO producers if Indonesia can significantly boost biodiesel demand to at least four million tonnes and shore up CPO prices significantly. We maintain our 'neutral' rating on the sector," she said.Indonesia has set up a public service agency to take charge of levy collection and management.Fadhil said Gapki president Joko Supriyonno had been appointed as one of the agency's commissioners and that the levy collection mechanism would operate like an asset management company for return on investments based on good tonnes corporate governance.Gapki has forecast that Indonesia will produce 32.5 million tonnes of CPO this year.Around 10 million tonnes are usually consumed in the country, of which close to half of that amount goes to biodiesel usage.Four months ago, Indonesia announced an increment in biofuel subsidies to 4,000 rupiah (RM1.13) per litre from 1,500 rupiah per litre to compensate biofuel producers for the price differences between regular diesel and biodiesel due to low petroleum prices.In April, the mendatory biofuel content in diesel blending was raised from 10 to 15 per cent. A big chunk of the palm oil levy to be collected will go towards biodiesel subsidies, thus ensuring better compliance with the B15 mandate.Fadhil said a portion of this levy would also go to the replanting research and human resources development in the Indonesia palm oil industry.This levy will be scrapped when the palm oil prices is higher than the US$750 per tonne threshold.Stay up-to-date by following Daily Express’s Telegram channel.
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This will come as a relie for planters as they will not have to face a double burden in times of higher palm oil prices.This is because when the palm oil price exceeds US$750 per tonne, planters pay a separate CPO export tax of between 7.5 and 22.5 per cent, should they choose to ship out the CPO. However, if the oil palm planters sell their CPO to local refiners, they will not be subjected to the export tax.