Indonesia expects to adjust base prices of crude palm oil and its by-products on October 12, drawing closer to the average level of international prices, a Trade Ministry official said on Monday. The base prices are used to calculate export taxes.
"Base prices of palm oil and its by-products will be set on October 12," said Dinah Maulida, director general for international trade at the ministry.
Maulida said the new base prices would be adjusted after the ministries of finance set exports taxes. "The base prices should be in reference to average level of international prices at Rotterdam and Kuala Lumpur markets," she added.
Industry sources have said base prices for CPO may be increased to $420 from the current $160 a tonne.
Indonesia currently imposes a three- percent tax on CPO and palm kernel and one- percent tax on refined, bleached and deodorised palm oil, RBD palm olein and crude olein.
There are some suggestions from the industry the export taxes should be lowered to one percent on CPO if the base price increases. "Despite the adjustment, end result of export tax tariff and base prices will approximately be the same as the current one," said Maulida.
Currently, exporters pay CPO taxes around $4.8 a tonne. Indonesia levies the tax to control the flow of palm oil exports, which usually rise sharply when the rupiah weakens and international prices increase.
Indonesia, the world's second-largest palm oil producer after Malaysia, is estimated to produce 13.6 million tonnes of palm oil this year, or 13 percent higher than last year helped by maturing trees and yield improvements.
Exports are expected to jump one million tonnes to 9.6 million tonnes. CPO account more than half of total exports shipped mostly to India, Malaysia.
The government has said the move aimed to help secure domestic supply and boost processing industries.
However, industry officials say the taxes would hurt farmers because xporters would automatically trim their budgets for buying raw materials to compensate for the export duty amid higher production costs due to recent fuel prices hike.