May 16, 2025
JAKARTA – The government is slated to raise its export levy on crude palm oil from 7.5 percent to 10 percent of the reference price starting May 17 to fund a biodiesel program and replanting efforts.
The world’s largest palm oil producer also increased levies for outbound shipments of other palm oil products, according to a regulation issued by the Finance Ministry on May 14.
Indonesia is heavily subsidizing biodiesel to meet its mandatory 40 percent biodiesel (B40) policy targets using export levy collection to make up for the high cost of turning palm oil into fuel, especially given the wide price gap between palm oil and crude oil.
Eddy Martono, chairman of Indonesia’s Palm Oil Association (GAPKI), expected that the increasing CPO export levy would make Indonesian palm oil less competitive globally.
“Our palm oil is now priced higher than neighboring countries,” Eddy said on Wednesday, as reported by Bisnis.
He explained that the industry is already facing major burdens, including the domestic market obligation (DMO) for cooking oil as well as the export levy and the export duty. The total cost of the three components reached US$221 per metric tonne.
“The figure was based on a CPO price of Rp 14,000 [84 US cents] per kilogram. We have yet to calculate the additional burden resulting from the new 10 percent levy,” he said, as Bisnis reported.
Indonesia began implementing its B40 policy in January this year.
The rule, which requires approximately 15.62 million kiloliters of CPO, took place when the country’s CPO production fell from 50.1 million tonnes in 2023 to 47.8 million tonnes in 2024, according to GAPKI.
The palm oil industry group also anticipated that B40 implementation could reduce CPO exports by 2 million tonnes.
Indonesian CPO export value fell 16.6 percent year-on-year (yoy) in January, despite prices rising from $835 to $1,134 per tonne. The weak CPO export performance was mainly due to a drop in volume, as Indonesia shipped out a mere 1.27 million tonnes in January compared with 2 million tonnes a year prior.
Despite bottlenecks, the Energy and Mineral Resources Ministry forecasts significant economic and environmental benefits from the B40 program, including a cut in fuel imports, particularly diesel, worth Rp147.5 trillion in 2025.
The ministry also predicts the program would boost CPO’s added value by Rp 20.9 trillion, lower carbon emissions by 41.46 million tonnes of carbon dioxide equivalent (CO2eq), as well as generate 1.95 million on-farm jobs and 14,730 off-farm jobs.
the Oil Palm Plantation Fund Management Agency (BPDPKS) expected subsidies for the B40 program could amount to Rp 46 trillion to Rp 47 trillion in 2025.
The agency expects to finance these subsidies from its funds, which include an estimated Rp 24 trillion from CPO export duties, bringing its total budget to Rp 53.5 trillion.
The subsidy is restricted to biodiesel produced under the public service obligation (PSO) scheme.