Palmoilmagazine.com, JAKARTA – The Indonesian Oil Palm Farmers Union (SPKS) has called on the government to adopt policies in the palm oil sector that support farmers rather than burden them. This plea coincides with the government’s plan to raise crude palm oil (CPO) export tariffs to support the mandatory B40 biodiesel program set to be implemented in early 2025.
To achieve the B40 biodiesel program’s targets, starting January 1, 2025, the government plans to increase the Export Levy (PE) on CPO from 7.5% to 10% based on the reference price set by the Ministry of Trade. This decision, however, fails to consider its impact on palm oil farmers in Indonesia.
Coordinating Minister for Economic Affairs Airlangga Hartarto explained that this tariff increase will serve as the primary funding source for biodiesel incentives managed by the Palm Oil Plantation Fund Management Agency (BPDPKS). The new tariff will be enforced following the issuance of a Finance Ministry regulation, though details on rates for other palm oil products remain unclear. Currently, PE tariffs are regulated under Finance Ministry Regulation No. 62/2024, with a 7.5% rate based on the Trade Ministry’s reference price.
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SPKS Chairman Sabarudin argued that increasing the CPO PE tariff to 10% is not the best option. “Raising the export levy will severely disadvantage palm oil farmers. Historically, any economic burden, including taxes and export levies, on CPO trade is passed down to farmers, the lowest link in the economic chain,” he stated.
“We estimate that this 2.5% tariff hike will reduce fresh fruit bunches (FFB) prices for farmers by IDR 300 to IDR 500 per kilogram,” Sabarudin added in a press statement to Palmoilmagazine.com, on Tuesday (December 31, 2024).
Export levies, currently managed by BPDPKS, allocate 90% of funds to subsidize companies producing biodiesel. This disproportionately benefits the biodiesel industry while sacrificing farmers through lower FFB prices.
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In the short term, the increased export levy will hinder farmers’ ability to adopt best cultivation practices due to their inability to afford fertilizers and other essential inputs. Over the long term, neglected and poorly maintained plantations will lead to reduced productivity, ultimately impacting the supply of raw materials needed for biodiesel programs. Furthermore, it will impede the implementation of the government’s Indonesian Sustainable Palm Oil (ISPO) certification program.
“This proposed 10% PE tariff increase is a double-edged sword and must be reconsidered. It will harm both farmers and the government,” emphasized Sabarudin.
