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Indonesia's Palm Oil Ban: A Controversial Move to Ensure Adequate Domestic Supply

Indonesia to Suspend Palm Oil Export Permits for Domestic Supply

The Indonesian government has announced that it will temporarily suspend some palm oil export permits to ensure adequate domestic supply, as cooking oil prices rise ahead of upcoming Islamic festivals. The move is aimed at addressing the accumulation of large shipment quotas by palm oil exporters, who have little incentive to supply the domestic market.

Under the policy known as "Domestic Market Obligation" (DMO), Indonesia issues export permits to palm oil companies that have already sold a portion of their products domestically. Currently, the DMO allows for export volumes that are six times what companies have sold domestically.

Around a third of the existing export quotas could be used immediately, while the rest could be used after May 1st, according to Firman Hidayat, an official at the Coordinating Minister for Maritime Affairs and Investment. At the end of January, exporters were holding around 5.9 million tonnes of export permits.

Retailers have expressed conc

ern over the difficulty in procuring cooking oil packages at lower prices, forcing them to sell them above the regulated price of 14,000 rupiah ($0.93) per litre. The Trade Ministry has ordered palm oil companies to increase their domestic supply to 450,000 tonnes per month until April, up from roughly 300,000 tonnes per month.

Lower global market prices and high export levies have been cited as reasons for the holding back of exports by companies, with little urgency for exports and thus, not meeting the DMO. The falling of palm oil prices, which have dropped more than 40% since reaching a peak last year, combined with the resumption of export levies in November has resulted in this situation.

In response to the tight supply in the domestic market, Sahat Sinaga, chair of the Indonesia Palm Oil Board, has called for cooperation from all parties, stating that distributors should not take advantage of the situation. Last year, Indonesia banned palm oil exports for three weeks, which had a significant impact on global edible oil markets. However, palm oil prices have since stabilized at lower levels.

In conclusion, Indonesia's suspension of palm oil export permits is a measure aimed at ensuring adequate domestic supply of cooking oil during the upcoming Islamic festivals. The government is trying to balance the interests of both the domestic market and the palm oil exporters.

Copyright @ Artha Asia Agriculture 2023.

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