JAKARTA – The Indonesian Palm Oil Association (GAPKI) has feared that the small exporters of palm oil will find it difficult to comply with the government’s decision to raise the domestic market obligation (DMO) from 20% to 30%. The DMO of 20% is seen already more than enough to cover the palm oil shortage and stabilize the price of palm cooking oil at the local market.
The DMO 30% of palm oil is stipulated in the trade ministry (Permendag) No.170/2022 on the appropriation of palm oil volume to be distributed at local market (DMO) and domestic price obligation (DPO) which has been effective since 10 March 2022. It rules that the DMO of 30% applies to producers who export crude palm oil (CPO) and refined, bleached, and deodorized palm oil (RBDPO).
“We fear that the increase of DMO from 20% to 30% will make it difficult for the small exporters to fulfill the obligation,” GAPKI Secretary General Eddy Martono said.
GAPKI has stated that the DMO of 20% of total volume of palm oil exports is already more than enough. “Based on the statement made by Trade Minister Muhammad Luthfi on 09 March 2022 that they had distributed 415,787 tons of cooking oil from the estimated consumption of 327,321 tons during the period of 14 February – 8 March 2022, then the policy of 20% DMO for palm oil has been more than enough,” Eddy told Investor Daily on Monday, 14 March 2022.
Bhima Yudhistira, director of the Center of Economic and Law Studies, said that currently there is no need for the 30% DMO policy for palm oil to meet the local need of cooking oil. He said that the shortage of cooking oil is not caused by the lack of CPO supply at the domestic market, but because the CPO supply has to be divided for the production of biodiesel and cooking oil.
“The local supply shortage was resulted from the increase of local consumption as a result of the mandatory production policy of biodiesel 30% or B30,” he said.
Bhima said that the government should first evaluate the implementation of DMO 20% before issuing the new policy.
Previously, the association of Indonesian vegetable oil industries (GIMNI) Executive Director Sahat Sinaga said that GIMNI objected to the government’s decision to raise the DMO policy from 20% to 30%. “Palm oil supply under the previous 20% DMO has been abundant to meet the local need,” said Sahat.
According to him, the current shortage of cooking oil is not caused by lack of supply but because its distribution is problematic.
Export disruption
The Palm Oil Agribusiness Strategic Institute (Paspi) Executive Director Tungkot Sipayung said that the application of palm oil DMO policy can disturb the palm oil exports. It is because the DMO compliance has become a requirement for exporters to export palm oil.
“Only by complying with the DMO policy, palm oil producers and exporters can export their products. If we keep applying such a policy, it will affect our palm oil exports. Within a month of the DMO 20% implementation, our exports had dropped. We might not enjoy the increase of palm oil price at the global market,” Tungkot told Investor Daily.
Actually, said Tungkot, there is no problem with the DMO policy if it is not made as a requirement to export. He cited as an example that with a total production of Indonesian palm oil at 51 million tons, then with the DMO 20% there will be an availability of 10 million tons of palm oil for the production of cooking oil, while total domestic consumption of palm oil (including for cooking oil) at 20 million tons. That means there is still around 30 million tons of palm oil that can be exported.
Tungkot also stated that the DMO policy tends to be irrational, especially with the application of DPO for CPO at Rp9,300 per kilogram (kg), including value added tax (PPN) from exporters to cooking oil industry players.
“Who bears the cost of transporting the CPO to the cooking oil factories which rely on the CPO producers? For example, a supplier buys the CPO from Belawan in North Sumatra and has to be transported to Gresik in East Java. How much is its transportation cost per ton? Will the CPO producers/exporters keep selling it at Rp9,300 per kg? Is it possible that they won’t take profit,” he said.
Such condition will likely result in piling up of the CPO and cooking oil as they could not be transported and exported. “Then it is potential to cause smuggling,” he concluded. (*)
Source : Investor Daily | Featured image via Kompas.com
