In a fresh attempt to boost exports and ease high inventories, Indonesia has removed its export levy for all palm oil products until Aug. 31, said the Finance Ministry, adding the move would not interrupt government revenues.
The resolution by the world’s biggest palm oil exporter could further depress prices, which have fallen by about 50% since late April to their lowest level in over a year. Indonesian palm oil producers have been struggling with high inventories since the country imposed a three-week export ban through May 23 to reduce domestic cooking oil prices.
While lifting the ban, Jakarta has implemented rules on mandatory local sales-known as the domestic market obligation (DMO)-to keep produce at home to be made into cooking oil.
It has also attempted to clear out storage tanks by lowering export taxes and launching a shipment acceleration program, but exports have remained slow, with companies blaming the DMO rules as well as problems with cargo vessel security.
The levy removal is intended to further support exports, but in the context of government revenues, the impact won’t be too big.
The Finance Ministry has said a progressive palm oil export levy would be applied starting Sept. 1, with the rate set at between $55 and $240 per tonne for crude palm oil, depending on prices. High palm oil stocks have forced mills to limit purchases of palm fruits.
Farmers have complained that their unsold fruit has been left to rot. There were 7.23 million tonnes of crude palm oil in storage tanks at the end of May, data from the Indonesian Palm Oil Association (GAPKI) showed. GAPKI welcomed the new measure.