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GAPKI Proposes the Lowering of Mandatory CPO Fund Contribution

27 March 2015 17:14 WIB

Rupiah Lemah, Kinerja CPO Stagnan

TEMPO.CO, Jakarta  The Indonesian Palm Oil Association (GAPKIhas called on the government to lower the mandatory contribution for the government’s Crude Palm Oil (CPO) Fund. According to GAPKI's executive director, Fadhil Hasan, the government’s CPO Fund Scheme is too harsh on local palm growers. "The amount needs to be recalculated and the collection of such funds needs to be justified logically, because it weighs heavily on our farmers," Fadhil said.

The government had initially imposed a mandatory contribution to the government's CPO Fund Scheme of US$50 per ton of CPO exports, and US$30 per ton for the export of olein-based products. The decision to impose such scheme was taken when CPO prices had fallen below US$750 per ton; the CPO fund is supposed to help cover the cost of converting CPOs into biodiesel in light of the government's plan to increase the biofuel component ratio in Indonesia's diesel fuels - marketed locally by state oil-and-gas company, Pertamina, as Solar - which is due to come into effect on April 1, 2015.

According to Fadhil, the CPO fund proposed by the government could potentially hurt local palm growers, because if the mandatory contribution is set at too high a rate, demand could drop as it increases the costs of doing business in the sector. "If the CPO fund contribution is maintained at its' current rates, the prices of palm crops could drop by up to Rp 500 per kilogram [kg]," he said, before adding that lowering the mandatory fund to US$30 per ton will only cause the price of palm crops to drop by around Rp 100 per kg at max.

That said, Fadhil has thrown in his support for the government's plan to increase the mixture of biofuel in Solar, because it will help raise the demand for CPOs in the market, which is expected to help stop the prices of CPOs from continuously dropping in the global market.

The Chairman of the Indonesia's Biodiesel Producers Association (Aprobi), Master Parulian Tumanggor, somewhat agrees with GAPKI's standpoint - whereas Tumanggor agrees with Fadhil that the scheme will help increase the prices of CPO in the world market, he disagrees with GAPKI's calls to lower the mandatory contribution, because by setting the rate at US$50 per ton for CPO exports, the government is expected to receive an additional Rp 800 billion annually - enough to cover the cost of producing biodiesel in Indonesia.

Tumanggor said that if the cost of biodiesel production could be covered by the mandatory collection, the demand for CPO could rise by six million tons per year - thus raising the price from US$650 to around US$800 per ton in just three months.

Previously, the acting Director General for Oil and Natural Gases at the Ministry for Energy and Natural Resources (ESDM), I Gusti Nyoman Wiratmadja, said that government's plan to increase the biofuel mixture ratio to 15 percent would raise production costs by Rp675 per liter - which will cause the cost of producing diesel fuels to balloon by Rp 11.4 trillion. However, in line with the government’s plan to decrease Indonesia’s dependence of government subsidies, and its' reluctance to yet again increase the prices of fuel, the government has decided to put the onus on the private sector by imposing the mandatory CPO Fund contribution.

ROBBY IRFANI | FAIZ NASHRILLAH

CPO


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