Wednesday, 20 May 2009

Regarding Increase of Prices of CPO The Government was Asked to Think More Comprehensively

The Indonesian Crude Palm Oil Council [DMSI] asked the government to think more comprehensively about increase of prices of CPO recently.

Max Remajaya, a member of management of DMSI, told Business News that the government should be more focused on poor families as targets compared to reducing the burdens of businessmen by giving Value Added Tax Borne By Government (TDP) facility for cooking oil.
Prices of CPO in Rotterdam (FOB) presently at USD 750/ton or USD 650/ton (which one is deemed more stable?). If prices increase, it is not necessary for the government to do intervention, because based on macro economic assumption, it means following market economy.
“USD 650/ton is good for industries. But can it improve welfare of the society or does it bring looses to the society because the prices they have to pay are higher?”

USD 750/ton is higher so that automatically the government must do intervention. With prices at USD 750/ton, companies will reap a USD 100/ton profit. And, this amount can be given as subsidy for the poor and can also be allocated for biofuel consumption.

“With consumption of CPO at 5 million tons a year plus demand for biofuel at around 1 million tons, total domestic demand reaches 6 million tons. If government subsidy is averagely around Rp. 3.000/liter x 6 million tons; with this amount, the government is no longer necessary to pay subsidy because, based on calculations, there will be a time when 1 liter of rice a month can be obtained free providing that government gets revenue from corporate taxes and export duty on export of CPO”.

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