Indonesia imposes export levy on palm oil products to fund biodiesel subsidy

Indonesia will impose export levies to fund biodiesel subsidies as well as replanting, research and development, according to Sofyan Djalil, coordinating minister for economic affairs.

The biodiesel subsidy was raised in February to IDR 4,000 (USD 0.31) per litre from IDR 1,500 (USD 0.12) per litre.

Shippers will have to pay a levy of USD 50 per metric tonne for palm oil and USD 30 for processed products starting this month. The government will keep the threshold for application of a separate export tax at USD 750 per tonne, the minister said.

“The funds will be used to compensate the price differences between the regular diesel and biodiesel,” Djalil said.

“It will also be used to help replanting, research and development and human resources development related to the palm oil industry.”

Indonesia has mandated biodiesel blends in petroleum diesel to go up to 15% in April, from 10%. Power plants are required to use blends of up to 20%.

The Chairman of the Association of Indonesian Automotive Manufacturers (Gaikindo), Johnny Darmawan, has said that the automotive industry is not yet ready for this change.

“There is a valve component on the car engine that needs to be replaced. It will take a while,” he told Tempo.