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Indonesia issues domestic sales rule for palm oil, companies' capacity will determine export volume

25 May 2022 9:33 pm
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Mumbai, 25 May (Commoditiescontrol): Indonesia formultated new regulation which will determine palm oil producers return to export markets. The latest rule mandates palm oil producers'domestic sales volume based on their refining capacity and local demand for cooking oil, a trade ministry regulation document showed on Wednesday, as the government plans an industry audit.

Further, each companies' fulfillment of the so-called Domestic Market Obligation (DMO) will be used as bases for the export volume in their permits, the regulation states. Producers and exporters will also be required to participate in the government's bulk cooking oil programme.

The world's top palm oil producer allowed the resumption of crude palm oil exports and its derivatives from Monday but put in place a policy of mandatory sales to the local market at a certain price level, known as a DMO, to secure the supply of the vegetable oil at home.

However, in the past, palm oil producers failed to comply with regulation and hence, forced the authority to impose a blanket ban on exports.

On Feb 9, Indonesia's trade ministry decided to include all palm oil products, which was until then kept out of the export ban purview. Earlier, the January ruling required suppliers to declare their export plans of crude palm oil, olein and used cooking oil.

From Feb. 15 all palm products must comply with the DMO before suppliers can get permits to export.

On Jan 27 Indonesia issued a mandate for palm oil producers to set aside 20% of their crude palm oil shipments for local buyers as the world's largest vegetable oil producer and exporter tries to curb high domestic edible oil prices.

Interestingly, the latest regulation takes effect immediately, but the Indonesia Palm Oil Association (GAPKI) said the wait is not yet over as some aspects of the DMO will be determined by other rules deriving from the ministerial regulation, such as the technical procedure to calculate the volume of the DMO.

GAPKI secretary general Eddy Martono said the industry is waiting for the government to announce those rules and that no export permit had been issued yet.

The industry ministry on Wednesday released a separate regulation stating that data from its bulk cooking oil distribution platform will also be used to determine export permit issuance.

An industry ministry official said in a statement companies that had distributed bulk cooking oil between March 18 and May 31 could choose to receive a subsidy from the CPO fund agency or get an export permit.

Meanwhile, the government plans to audit all palm oil companies operating in the country and require them to move their headquarters onshore amid efforts to improve governance of the sector, senior cabinet minister Luhut Pandjaitan told local media.

Luhut's spokesperson, Jodi Mahardi, said on Wednesday the government will audit companies' land size, partnership with nearby smallholder farmers, and tax reports, among others.

The government will also get palm oil companies to set up headquarters in Indonesia, Jodi said, without elaborating.

Several Indonesian palm oil companies are listed or headquartered in neighbouring Singapore while some Malaysian companies operate plantations in Indonesia through local subsidiaries.

Luhut said the audit could be launched as early as next month, while Jodi added it could happen after cooking oil prices stabilise.

While Indonesia typically consumes less than 40% of the 46 million - 48 million mt of crude palm oil, or CPO, that it produces, domestic cooking oil prices have surged in the past year as local prices rose on the back of record surges in international vegetable oil markets through 2022.

(By Commoditiescontrol Bureau: +91-22-40015505)

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