Indonesia considers lowering palm oil export tax threshold- industry

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JAKARTA (March 18) - Indonesia is considering lowering the threshold it applies to its monthly export tax for crude palm oil (CPO), a major industry group in the world's top producer said on Friday, in an effort to aid some processing industries hurt by low prices.

When international and local crude palm oil prices average below $750 a tonne, Indonesia currently cuts the CPO export tax it sets each month to zero.

Government ministries are now in talks about cutting the threshold to between $500-$600 a tonne, Derom Bangun, chairman at the Indonesian Palm Oil Board (IPOB) said after a meeting with other palm groups to discuss the issue.

"They would like to lower the threshold so the tax can be applied even if the price is lower than $600," said Bangun, adding that he had spoken to government officials about the matter and that no timeline had yet been given.

"The ministry of industry especially would like to have this change so the downstream industry, which is now in a difficult situation, can get back to full operations," added Bangun, whose group is an umbrella organisation of major Indonesian palm oil associations and gives policy recommendations to the government.

Indonesia's trade and industry ministry could not be reached for comment on Wednesday.

Southeast Asia's biggest economy set its crude palm oil export tax for March at zero, unchanged since October last year. Malaysian palm oil futures have fallen 20 percent over the last year.

The CPO export tax, which was designed to aid processing industries and secure domestic supplies of the tropical oil, rises to a maximum of 22.5 percent depending on how far above $750 average prices climb.

Looking to protect its biofuels industry against lower crude prices and cut costly diesel imports, Indonesia introduced several biodiesel mandates in recent weeks and has mooted the idea of tax breaks for CPO producers.

Major palm oil firms operating in Indonesia include PT Sinar Mas Agro Resources and Technology, Malaysia's Sime Darby and Singapore-based Wilmar International Ltd .