Indonesia plans to impose a 20 or 25 percent export tax on crude palm oil and its by-products if international prices hit $1,200 and $1,300 a tonne, a deputy minister at the chief economics ministry said on Monday.
The move is part of new government measures unveiled on Friday to contain rising prices of staples, targeting palm oil-based cooking oil, wheat flour, rice and soyabeans. "We will continue progressive export tax on palm oil. The tax will be raised to 20 or 25 percent if crude palm oil price in Rotterdam hit above $1,200 and $1,300 a tonne," said Bayu Krisnamurthi, deputy to the chief economic ministers.
At present, palm oil is subject to a maximum export tax of 9 and 10 percent, depending on the products. The government adjusts palm oil export tax monthly, following the movement of crude palm oil on international markets in a bid to contain a jump in local prices and ensure supplies in the domestic market. Despite being the world's top palm oil producer, local cooking oil prices have surged since last year as strong demand from both the biofuel and food sectors have pushed global palm oil prices to record highs.
The government has been scrambling to keep inflation in check as a rally in global commodity prices has helped push the price up of other food crops staples such as wheat and soyabean to all-time highs and hurt many in a country where millions of people live on less than $2 a day.
Indonesia is a major importer of food crops such as soyabean, wheat and rice because local output is often not sufficient to meet any surge in demand due to disruption in local supplies, including from crop failures and natural disasters.
Rising food price helped push up annual inflation to 7.36 percent in January, the highest since September's 2006 14.6 percent. But Krisnamurthi said the government would lower export tax by between 1-4 percent for other higher value palm oil by-products to boost exports.
"We need to provide incentives for the downstream industry so that it won't collapse," he said, without elaborating. Indonesia is expected to produce 18.8 million tonnes of palm oil this year, contributing about 45 percent of global palm oil production of 41.4 million tonnes, Hamburg-based oilseeds analysts Oil World said in January.