The government plans to expand the biodiesel mandate program from this year's B35 to B40 in 2025. The B40 program, which involves blending 40% biofuel (derived from crude palm oil, CPO) with 60% automotive diesel, is set to begin early next year.
To support the expanded biodiesel mandate, the government anticipates an increase in the required subsidy budget. As a result, it plans to raise the CPO export levy, which has been a primary funding source for the biodiesel program.
Coordinating Minister for Economic Affairs, Airlangga Hartarto, confirmed that the CPO export levy will increase in January 2025, aligning with the implementation of B40. The Minister of Finance is expected to issue a regulation soon to enforce the new levy rate.
"The CPO export levy will be raised to 10% from the current rate of 7.5%," Airlangga said on Friday (December 20).
Read also: Govt to launch B40 biodiesel program in 2025
The export levy for other processed palm oil products will be set at a minimum of 4.5%. Currently, the export levy for downstream CPO products ranges from 3% to 6%, based on the Ministry of Trade's CPO Reference Price.
Airlangga emphasized that the funds collected from the CPO export levy will continue to be managed by the Palm Oil Plantation Fund Management Agency (BPDPKS), with the majority allocated to subsidize the biodiesel mandate program. "The funding will still come from BPDP," he explained.
BPDP’s Corporate Division Head, Achmad Maulizal, mentioned that discussions on the implementation and procedures for the increased CPO export levy are still ongoing.
"We are still waiting for the meeting minutes," he told Kontan on Friday.
As of September 2024, BPDP allocated Rp 17.03 trillion for the B35 program subsidies. Deputy Coordinator for Food and Agribusiness at the Coordinating Ministry for Economic Affairs, Dida Gardera, previously stated that BPDP's current funding is sufficient to support the B40 program.
"Based on an analysis with BPDP, the available funds are adequate to implement the B40 policy in 2025," Dida remarked.
Impact on exports
The Chairman of the Indonesian Palm Oil Association (Gapki), Eddy Martono, noted that BPDP's reserves might have declined, which led to the decision to increase the CPO export levy.
However, the levy increase may impact CPO exports and its derivatives.
"When the export levy was reduced to 7.5%, it briefly boosted exports. But raising it to 10% again will reduce our competitiveness," Eddy said in a statement to Kontan on Friday.
Eddy added that the higher levy will increase costs for exporters. Combined with the obligation to pay export duties (BK), exporters now face an additional burden of around US$140 per ton.
Editing by Reiner Simanjuntak
