Businesses have no problem with palm oil export tightened
This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily
3 January 2023
By: Ridho Syukra and Leonard AL Cahyoputra
Jakarta - The Indonesian Palm Oil Association (IPOA) supports the tightening of palm oil exports enforced by the government starting 1 January 2023. The government through the Trade Ministry has reduced the export multiplier ratio from 1:8 to 1:6 in the hope of an abundant palm oil supply in the domestic market, especially during Ramadan-Eid. However, businesses hope that the policy could be evaluated as often as possible by considering the national palm oil production volume.
IPOA General Secretary Eddy Martono said the tightened export policy was implemented to anticipate an increase in domestic consumption, especially related to the plan of 35% biodiesel (B35) implementation and the start of Ramadan at the end of March 2023. Meanwhile, at the same time or in the first quarter of 2023, domestic palm oil production is predicted to decline. “Actually, there is no problem, as long as this policy is always evaluated in the short term. If production does not decline as predicted, the policy can be readjusted immediately to prevent accumulation of fresh fruit bunches (FFB) in the factories, which might put pressure on FFB price at the farmer level,” said Eddy when contacted by Investor Daily on Monday (02/01/2023).
Trade Minister Zulkifli Hasan stated that, having learned from cooking oil scarcity last year, the Trade Ministry decided to start reducing the export volume of palm oil and its derivatives. This is to secure domestic supply before Ramadan-Eid 2023. The mechanism is by reducing the export multiplier ratio from the domestic market obligation (DMO) volume carried out by corporations. Previously, the ratio of the export multiplier to the DMO volume was 1:8, which means businesses would obtain permission to export CPO eight times the DMO volume provided within the country. “The rules are already in place, now it becomes 1:6. Why? This is to prepare for Ramadan-Eid, when the domestic demand for palm oil may increase,” said Minister Zulkifli in a hybrid press conference held on the same day.
The Trade Ministry’s Acting Director General of Domestic Trade, Kasan, during a Regional Inflation Control Coordination Meeting on 26 December 2022, said that the policy of reducing the export multiplier ratio had been decided at a meeting chaired by the Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan a week before 26 December 2022. “To ensure that domestic cooking oil supply, both bulk and packaged, is back to normal, the export multiplier ratio has been reduced from 1:8 to 1:6 starting 1 January 2023,” explained Kasan. If previously exporters distributing 1 tonne of DMO cooking oil would get 8 tonnes of export rights, starting 1 January 2023, exporters distributing 1 tonne of DMO cooking oil could get 6 tonnes of export rights. This decision was jointly calculated under the coordination of the Coordinating Ministry for Maritime Affairs and Investment.
In his presentation material, Kasan explained that the DMO realisation of palm oil for the period of June until 18 December 2022 reached 1.88 million litres with an average realisation above 98% of the monthly DMO fulfilment target at 300 thousand tonnes. As monitored by the Trade Ministry, the price of bulk cooking oil is more expensive than packaged. MinyaKita packaged cooking oil costs Rp14,000 per litre, but there are bulk cooking oils that cost more than Rp14,000 per litre. This happened because the trend of bulk cooking oil supply from June until December 2022 continued to decline, while the trend of packaged cooking oil supply increased. “However, the portion of bulk cooking oil is currently around 72-73% and packaged cooking oil around 27%,” he said.
Safe export performance
On this occasion, Minister Zulkifli was convinced that the policy of reducing the multiplier ratio would not have a major impact on export performance, because the quota given remains sufficiently large. Exporters still have the flexibility to export after fulfilling their DMO obligation. “Businesses’ export data is more or less 6 million tons. If it is 3 million tonnes a month, so January-February is still available. I think this 1:6 ratio would not have significant effect (on export performance). This is a signal that domestic interests should be prioritised and increased,” he said. Within 100 days of his performance as the Trade Minister, Zulkifli said that MinyaKita has been available in 34 provinces, including East Nusa Tenggara, West Papua, and Papua, at a price according to the highest retail price of Rp14,000 per litre.
According to Zulkifli, the stabilisation of the price of cooking oil and other staple goods throughout the second semester of 2022 has contributed to inflation rate reduction amid rising fuel prices. Until November 2022, general inflation was recorded at 5.42% (year-on-year/yoy), which is the lowest figure since May 2022. “The Trade Ministry’s strategy is its commitment to go directly from market to market. Until now, there are already 44 markets from Al-Mahira Market, Lamdingin, Banda Aceh City on the western end to Remu Central Market, Sorong, West Papua on the eastern end. In the future, all personnel of the Trade Ministry and I will continue to make rounds to ensure that the prices and availability of staple goods are under control,” he said.
