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Indonesian government plans to raise palm oil export levy - minister

JAKARTA (Reuters) - Indonesia’s chief economic minister, Airlangga Hartarto, said on Wednesday the government plans to increase palm oil export levies to support expansion of its palm biodiesel programme.

FILE PHOTO: Palm oil plantation is pictured next to a burnt forest near Banjarmasin in South Kalimantan province, Indonesia, September 29, 2019. REUTERS/Willy Kurniawan

“The increase is currently being calculated, whether it will be a flat increase or progressive,” Hartarto told reporters. Further details on the plan are still being discussed, he said.

Indonesia, the world’s largest palm oil producer, is expanding its biodiesel programme to use more palm oil as a feed stock for transport fuels in order to cut energy imports.

The country collects levies to help finance its palm oil policies such as biodiesel subsidies and replanting programmes for smallholders. The levies are currently set at a maximum of $50 per tonne for palm oil exports, depending on the type of palm product and a government-set reference price level.

Hartarto said the levies will be increased because the price difference between the biodiesel made from palm oil and standard gasoil - as diesel is called in Asia - has widened.

The government price for unblended biodiesel jumped to 9,539 rupiah ($0.6877) per litre in February, its highest since data become available in mid-2015. In comparison, the February standard diesel price was set at 6,674 rupiah per litre.

Biodiesel blends, however, are currently sold at local gas stations at 5,150 rupiah per litre.

The Estate Crop Fund, an agency in charge of collecting and managing the levies, disburses funds to biodiesel makers to makeup the price difference between the two fuels.

Analysts have questioned the fund available for the subsidy, given that crude palm oil prices have increased in recent months and since the agency had to pause levy collections last year.

As of mid-December, the agency had around 18 trillion rupiah ($1.3 billion) in funds.

Reporting by Tabita Diela and Bernadette Christina; Additional reporting by Fathin Ungku in Singapore; Writing by Fransiska Nangoy; Editing by Tom Hogue