The Indonesian government has removed the export tax for all palm oil products for a limited period between 15 July-31 August in a bid to boost exports amid an excess of domestic supply, AgriCensus reported on 18 July.

Following the removal of the export tax for the stated period, it would be reinstated from 1 September when a progressive rate structure would apply depending on the crude palm oil (CPO) reference price, AgriCensus quoted from an official document published on 16 July by the country’s finance ministry.

The maximum export levy for CPO was previously set at US$200/tonne from 14 June to 31 July, if the CPO reference price exceeded US$1,500/tonne, according to the report, with Indonesia planning to raise it to US$240/tonne from 1 August.

However, a combination of rising domestic stocks, slow exports and pressure from farmers facing an oversupply of palm fruit had caused the government to backtrack on its earlier plans and consider new measures to raise export volumes, the report said.

The rise in stocks is mainly due to a three-week palm oil export ban which Indonesia introduced on April 28 in a bid to control high prices of local cooking oil, according to the report.

Following the lifting of the ban on 23 May, a range of measures had been introduced to boost trade, including a reduction in export taxes, the launch of a special export acceleration programme, a rise in export quotas and an increase in the biodiesel blending mandate from B30 to B35, AgriCensus wrote.

However, latest figures from the Indonesian Palm Oil Association (Gapki) showed that stock levels remained at 7.23M tonnes at the end of May while market sources estimated current inventory levels at between 7M-9M tonnes.

High stocks had also caused palm oil mills to reduce purchases of fresh fruit bunches (FFB), the report said, with farmers protesting against the government’s export policies as unsold palm fruit had been left to rot and prices had dropped.

Senior minister Luhut Pandjaitan had earlier said that reducing the palm oil export tax and increasing exports would allow the price of FFB in the market to gradually rise, AgriCensus wrote.