High Palm Oil Price Become a Temptation of Implementation the Mandatory B30 Policy ?
During the first quarter of 2021, the price of palm oil (CPO) shows an increase significantly. The CPO futures contract price on the Bursa Malaysia Derivative Exchange on March 12, 2021, broke RM4,125/ton and became the highest CPO price ever recorded (all-time high). However, the CPO futures contract price has continued to decline in the past week. On Friday (19/3/2021), the CPO futures contract price for delivery in June 2021 was only RM 3,724/ton.
Although the price of palm oil has decreased in the last week as a result of the re-implemented lockdown policy in several European countries and other negative sentiments such as the decline in crude oil prices, the predictions of experts regarding palm oil prices which will remain high in the first quarter of 2021 are proven. The dynamics of supply-demand that still occur have caused the price of palm oil (CPO) to still on top.
The bright price of palm oil in the international market makes producers happy because they can get a higher profit, but on the other hand, this price trend is also a temptation for the continuity of the B30 program. Because this is a momentum that producers can use to prefer to export their palm oil rather than ensuring the availability of raw materials for FAME production.
The Executive Director of PASPI, Dr. Tungkot Sipayung, in his interview on the Market Review program on the IDX Channel Youtube channel (17/3/2021) reminded palm oil producers not to be tempted by the high palm oil prices to export and leave the mandatory B30 program. He also reminded them that the B30 program implemented by Indonesia was one of the main factors driving the skyrocketing price of palm oil as it is today.
Director of Godrej International Ptd, Dorab E Mistry, in the webinar “15th Indonesian Palm Oil Conference (IPOC) 2019 and 2020 Price Outlook” also explained the same thing that President Joko Widodo’s policy to implement the mandatory B30 policy became a game-changer and became a positive sentiment and brought optimistic for the global palm oil market amid the Covid-19 pandemic.
Besides that, the mandatory B30 program implemented in 2020 also brings benefits for about USD 2.66 billion in fossil diesel foreign exchange savings and 22.3 million tons of CO2 reduction in emissions. The implementation of B30 also not only had an impact on the increase in the price of palm oil (CPO) in the international market (CIFF Rotterdam) which reached USD 954/ton in December 2020, then the CPO price was transmitted to the average monthly price for Riau FFB received by farmers, which ranges from IDR 1,500-2,000/kilogram. The increasing trend of palm oil prices has also had an impact on the positive performance of palm oil company stocks in 2020.
The large benefits received by palm oil industry players and Indonesia due to the implementation of B30 should be a blockhouse against the temptation of exports to take advantage of the momentum of the high palm oil prices. Palm oil stakeholders, including palm oil producers, both plantation companies and smallholders, FAME companies, as well as related Ministries and Government Agencies such as Pertamina, the Ministry of Energy and Mineral Resources, Le Migas, and others must more synergize and collaborate to achieve the allocation target for the distribution of 9.2 million kiloliters of biodiesel by 2021.
The high price of palm oil in the global market has a widening gap between Index Prices of Biodiesel and Solar, which has implications for the large of incentives provided which are estimated to reach IDR 46 trillion in 2021. This condition causes the postponement of the mandatory B40 program which is scheduled to be implemented in 2021. Even though the B40 program is delayed, we must commit to continuing B30 program. This is because the biodiesel policy is the anchor of economic policies that can provide greater benefits (economic, environmental and social) with a larger scale/coverage of the population that enjoys in long term.
To answer these challenges while ensuring the continuity of the mandatory biodiesel program, the Indonesian Government issued a Minister of Finance Regulation No. 191 of 2020 concerning changes in the tariff of export levies. Adjusting the export levy tariff to a progressive rate with the amount of levy that continues to increase along with the increase in palm oil prices is a commitment and a solution to maintaining the sustainability of the palm oil program under the management of BPDPKS, one of which is the mandatory biodiesel program.
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