Indonesia, one of the largest exporters of palm oil, plans to cut export duty on palm oil early next month to support its farmers amid drop in demand.
The development will be a major relief for Indian importers particularly after the Government increased the customs duty on crude soyabean oil, crude palm oil, and crude sunflower oil from 20 per cent to 27.5 per cent.
Additionally, the import duty on refined oil including palm oil was increased to 35.75 per cent from 12.5 per cent to support domestic farmers during the crushing season.
The production of palm oil in Indonesia is expected to be lower marginally at 53 million tonne against 54.8 mt logged in last year. In the first half of this year, the output was down at 26.2 mt against 27.3 mt recorded in the same period last year.
Exports of palm oil from that country dipped to 15.1 mt in the first half of this year against 16.3 mt logged in the previous year due to lower demand from China and India. Last year, Indonesia exported 32.2 mt of palm oil largely to India, China, European Union, Pakistan and Africa.
M Fadhil Hasan, Head of Foreign Affairs, Indonesian Palm Oil Association told businessline, that the government is considering a export duty cut to support sustainability initiative though ramping up bio-diesel blending and support farmers who have been hit by drop in export demand.
The industry last year diverted 10.64 mt of palm for biodiesel production and this will increase to 11.5 mt this year. Till June, 5.4 mt of palm has been used by the biodiesel production, he added.
Tax and Levy
Under current rules, Indonesia imposes a fixed export tax and a levy ranging between $55 to $240 a tonne for crude palm oil exports, depending on global palm oil prices.
There are 17 brackets for the levy, with the lowest tax rate kicking in when palm oil prices are below $680 a tonne and the highest rate when it is above $1,430 a tonne.
Palm oil prices have increased to $1,008 a tonne as of June against $964 a tonne registered last year.
On the Indian government hike in customs duty, he said the impact on imports will be minimal as it is very difficult for the country to sustain without imports.