JOURNAL MONITOR EDITION 16 : PROGNOSIS OF NEW CPO EXPORT LEVY AND ALTERNATIVE IMPLEMENTATION TO MINIMIZE THE WORSE-OFF
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The Indonesian government has issued PMK No. 57/2020 related to changes in BLU BPDPKS rates. The Ministry of Finance (PMK) mentioned the amount of export levies for CPO of USD 55 per ton. The export levy policy has resumed after the last 1.5 years not being implemented due to the declining trend in world CPO prices. When compared with PMK No. 152/2018, CPO export levy rates increased by USD 5 per ton ie from USD 50 per ton (at a reference price of CPO above USD 619 per ton) or an increase of USD 30 per ton ie from USD 25 per ton (at reference prices of CPO is USD 570 per ton – USD 619 per ton).
Theoretically, the export levy policy as one of the instruments of the export tax will have an impact on the decline in the welfare of producers (oil palm planters and plantation companies) which is greater than the increase in the welfare of the downstream palm-based industry and additional government revenue as well as reducing the competitiveness of Indonesia’s CPO exports in the market international.
However, by using a comprehensive perspective to see cases faced by the national oil industry during the Covid-19 pandemic, where there was oversupply of CPO on the domestic market, causing a decrease in CPO and FFB prices, the policy of increasing CPO export tariffs was considered to be a relevant policy to be implemented. This is because the policy will stabilize the supply of CPO in the international market because of the increase in domestic absorption by the downstream industry, particularly the biodiesel industry through the B30 mandatory program.
The increase in the amount of export levy is also a solution to the problem that has the potential to hamper the operation of the B30 mandatory program in Indonesia, namely the difference in the biodiesel Market Price Index (HIP) and the widening diesel prices due to the downward trend in world diesel prices.
The large difference causes the burden of incentives (subsidies) given by the government to biodiesel producers to be even greater. With the increased export levy tariffs, it is expected to be able to optimize the implementation of the B30 mandatory program. So that the program is expected to be able to improve the price of CPO and FFB, save on foreign exchange imports that can nourish Indonesia’s trade balance to produce a larger multiplier effect that can contribute to the country’s economy.
The prognosis described above shows that the policy to increase CPO export tariffs is a policy that is quite relevant to be implemented at this time. However, the implementation requires timing and schedule to minimize the negative impact of falling CPO and FFB prices at the producer level. Optimization of palm oil downstreaming through the mandatory B30 must first be ensured to run optimally before enacting a new export levy policy.
This is because oil palm farmers and companies as producers of CPO and FFB must still be profitable because of the high prices of CPO and FFB which have been enjoyed as a mandatory impact of B30, even though the price of FFB/CPO has declined again as a result of the implementation of export levy. In addition, it is also suggested that PMK 57/2020 still follows the systematic in PMK 152/2018, where there is a threshold price for applying export levies with progressive export levies following a certain reference price range.