Indonesia Revises Palm Oil Export Levy While Safeguarding Biodiesel Funding

Jakarta — Indonesia has revised its palm oil export levy through Finance Minister Regulation (PMK) No. 76/PMK.05/2021. The regulation, signed and promulgated on 25 June 2021, raises the threshold for progressive levies from a CPO price of US$670 to US$750 per tonne and is scheduled to take effect on 2 July 2021. The government says the adjustment is intended to improve export competitiveness while maintaining the Plantation Fund Management Agency’s (BPDPKS) services, including biodiesel incentives.

PMK 76/2021 is the second amendment to PMK 57/2020 on BPDPKS service tariffs. It modifies the structure previously tightened under PMK 191/2020 as palm oil prices rose. Under the new arrangement, the levy will no longer begin increasing when CPO moves above US$670 per tonne. The progressive bands will instead start after the reference price exceeds US$750 per tonne.

CPO levy rises to a maximum of US$175 per tonne

The regulation’s appendix sets the CPO export levy at US$55 per tonne when the reference price is at or below US$750 per tonne. It then increases in stages to US$75, US$95, US$115, US$135, US$155 and a maximum of US$175 per tonne when the CPO price is above US$1,000 per tonne.

The Ministry of Finance said each US$50-per-tonne increase in the CPO price will add US$20 per tonne to the levy on crude products and US$16 per tonne to the levy on derivative products, up to the US$1,000 price level. The applicable charge will be based on the reference price issued by the Ministry of Trade, with the calculation tied to the date of the export declaration.

According to the government, the combined burden of the export levy and export duty, which could reach the equivalent of 36.4% of the CPO price under the previous structure, will fall to below 30%. This is the government’s estimate of the maximum burden on exporters, rather than a single rate applied to every shipment.

Levy revenue remains linked to biodiesel

The adjustment comes as the palm oil fund plays an important role in covering the difference between the biodiesel market index price and the price of fossil diesel. The Ministry of Finance said the continuity of BPDPKS programmes remained a consideration, including biodiesel incentives, smallholder replanting, research, human-resource development, promotion, and plantation infrastructure.

The government also links the levy system to domestic market creation through the mandatory biodiesel programme. The mandate absorbs part of Indonesia’s palm oil output and supports domestic demand when export markets change. Readers can follow the blend’s development through the biodiesel mandate dataset and learn about its pricing mechanism in the biodiesel market index price dataset.

BPDPKS said the revised tariff still takes into account the fund’s capacity to finance these programmes. At the same time, the higher progressive threshold is intended to make Indonesian palm oil products more competitive at price levels that previously triggered an immediate levy increase.

Balancing exports, farmers and the domestic market

In its statement, BPDPKS said average fresh fruit bunch prices from January to May 2021 were above IDR 2,000 per kilogram. It also said the smallholder replanting programme was allocated for 180,000 hectares a year, with support of IDR 30 million per hectare. The government presented these figures to show that levy revenue supports programmes beyond biodiesel.

The new structure illustrates the policy balance Indonesia is trying to maintain: preserving revenue for palm oil and biodiesel programmes, limiting the export burden when prices rise, and continuing support for smallholders. Its eventual effect will depend on the CPO reference price and export volumes after the new tariffs enter into force.