The Indonesian government has announced an increase in its export levy on crude palm oil (CPO) from 7.5% to 10% of the reference price, aiming to fund its national biodiesel programme and boost replanting in the sector, reports Borneo Bulletin.
According to a new regulation from the Finance Ministry, the revised levy also applies to various palm oil products. The move is part of Indonesia’s efforts to sustain its palm oil industry and support the implementation of its B40 biodiesel policy, which requires a 40% palm oil mix in diesel fuel.
As the world’s top palm oil producer, Indonesia relies on export levies to bridge the price difference between palm oil and fossil fuels, making biodiesel more affordable to produce.
However, the increased levy has sparked concerns among industry leaders. Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), warned that the decision could weaken Indonesia’s competitiveness in global markets.
“With this increase, our palm oil becomes more expensive than what neighboring countries offer,” Martono told local media. He added that Indonesian exporters are already weighed down by several charges, including export duties and obligations to supply cooking oil domestically—totaling around USD 221 per metric tonne.
Despite these concerns, the government is standing firm on its biodiesel goals, citing national energy security and support for small farmers as key reasons. The new levy is based on a CPO price of IDR 14,000 (USD 0.84) per kilogram, although the precise financial impact of the increase is still being calculated.
Indonesia began rolling out its B40 mandate in January 2024, requiring about 15.62 million kilolitres of palm oil. This came at a time when CPO production dropped from 50.1 million tonnes in 2023 to 47.8 million tonnes in 2024, raising concerns about supply shortages. GAPKI has estimated that the B40 policy could cut palm oil exports by 2 million tonnes.
In January alone, Indonesia’s CPO exports dropped 16.6% year-on-year, with only 1.27 million tonnes shipped—down from 2 million tonnes the previous year—despite a rise in global prices.
Still, the Energy and Mineral Resources Ministry projects major gains from the biodiesel programme. Officials say it could cut fuel imports worth IDR 147.5 trillion in 2025, add IDR 20.9 trillion in value to CPO, reduce carbon emissions by over 41 million tonnes, and create nearly 2 million jobs both on and off farms.
The Oil Palm Plantation Fund Management Agency (BPDPKS) estimates that subsidies for the programme could cost between IDR 46 trillion and IDR 47 trillion in 2025.
