JAKARTA – The Indonesian government should revoke all palm oil policies that had distorted the market and hindered efforts to expedite the exports of palm oil products if it wants to help the smallholders who have complained over the low price of their palm fresh fruit bunches (FFB) due to the poor performance of palm oil exports, a webinar on palm oil policies concluded on Monday.

Addressing the webinar, Dr. Eugenia Mardanugraha S,Si, M.E,  the research team leader of the Economy and Society Research Institution of Economics and Business Faculty of the University of Indonesia (UI), said that the palm oil policies include the maximum retail price (HET), domestic market obligation (DMO), domestic price obligation (DPO), subsidy, flush out, palm export permit, palm oil levy and palm oil export tax.

“The government should be prudent in taking palm oil policies, so that it won’t disturb the market mechanism. A good policy is the one that causes the least distortion of market,” Eugenia told more than 500 participants of the webinar on the impacts of cooking oil price control policy on independent smallholders, which was organized by Majalah Sawit Indonesia on Monday.

She cited that the government’s decision to limit and then ban palm oil exports has resulted in the overcapacity of the crude palm oil (CPO) producers’ storage tanks. As a result, the palm oil mills decided to limit or even stop buying the FFB from smallholders.

“The cooking oil HET policy has distorted the market and caused scarcity in the market. The government should revoke it and change it to an instrument that will ensure the availability of cooking oil in the market at affordable price,” Eugenia said.

She pointed out that certainly there will be scarcity if producers have to sell their products below their economic prices. Currently, the government still applies the HET policy for bulk cooking oil at Rp14.000 per liter.

Eugenia said the market distortion was resulted from the disparity of market price and the government’s reference price, causing speculative actions to buy more than what is needed. It has also caused the practices of packing the bulk cooking oil for resale or smuggling.

According to her, it is better for the government to help the needy people by distributing the cooking oil free of charge or selling it with subsidized price. “But certainly, a further research is needed to implement it. How much the subsidy is needed, the category of eligible people for subsidy, and the volume of cooking oil needed for such program,” she said.

Based on the simulation they had conducted, every 1% increase of cooking oil price will push up the cooking oil supply by 1.174%. Assuming the market price of cooking oil at Rp25,000 per kg, and its HET at Rp14,000 per kg, the price disparity will be at 44%. Then its scarcity percentage will be 49%. “If we assume the demand in 2022, based on data from GAPKI (the Indonesian Palm Oil Association) at 9.6 million tons then the scarcity will reach 4.8 million tons, which is resulted from the HET policy,” she said.

GAPKI Chairman Joko Supriyono, who also addressed the webinar as a panelist, said the government should continue the implementation of subsidy as it is aimed to help the underprivileged community.

“The current issues are not only concerned with the export increase and price of the smallholders’ FFB. We also need to provide cooking oil at certain volume for people of middle and lower class,” Joko told the participants of the webinar, which was also addressed by Sahat Sinaga, Executive Director of the Indonesian Vegetable Oil Refiners Association (GIMNI), Gulat ME Manurung, Chairman of the Indonesian Oil Palm Smallholders Association (APKASINDO), and moderated by Tofan Mahdi, Head of GAPKI’s Communication Division.

Concurring with all other speakers, Joko called on the government to also revoke the DMO policy. “The DMO policy is proven to have hampered the exports in a complex way. It needs a traceability of CPO and cooking oil supplies to the general public. In fact, it is not the responsibility of exporters,” he asserted.

Source: sawitindonesia.com/Investor Daily| Featured image via republika.co.id