Indonesia to revert to palm oil DMO after lifting export ban

• The government has decided to bring back the domestic market obligation (DMO) policy for palm oil, in the hope of stabilizing domestic cooking oil prices after it lifts an export ban on the commodity.
• Coordinating Economic Affairs Minister Airlangga Hartarto said the government aimed to accumulate 10 million liters of cooking oil through the DMO, a fifth of which would act as reserves.
• Producers must supply the products at government-set prices, also known as the domestic price obligation (DPO). The minister did not specify which type of palm oil products would be subject to the new DMO.
• “Producers who do not fulfill DMO obligations or do not distribute to the community as mandated by the government will be punished in accordance with the rules,” Airlangga told reporters.
• The announcement came a day after President Joko “Jokowi” Widodo announced plans to lift an export ban on palm oil on 23 May 22, the first step in undoing a three week-long policy that shook global markets.
• Prior to the export ban, the government implemented a DMO and DPO policy for palm oil from Jan 22 to Mar 22.
• The policies required producers to sell at least 20% of their output in the domestic market at less than IDR9,300 per kilogram for CPO and IDR10,300 per kg for olein. The policy was scrapped after it failed to address the cooking oil shortage.
• The ban caused outcry from smallholders, whose incomes dropped as domestic fresh fruit bunch (TBS) prices crashed. Smallholders also called on the government to enforce regulated TBS prices on companies.
• Airlangga said the Trade Ministry, in coordination with the Finance Ministry and Industry Ministry, was working on the regulation to officially lift the export ban.
• The Trade Ministry is also working on regulations to implement the DMO, including the amount of palm oil each producer needs to supply to meet the DMO target.
• The government will also tighten control over the distribution of cooking oil by requiring buyers to show their citizenship identity cards (KTP) when buying the product in traditional markets, and will require producers to purchase TBS from farmers at certain regulated prices.
• The government will assign the State Logistics Agency (Bulog) to establish a cooking oil reserve amounting to 10% of total domestic demand, hoping it can accelerate distribution and stabilize prices.
• Total demand is estimated at 194,000 tons per month. Airlangga said regulators would deliver more details before 23 May 22.

External Link : https://www.thejakartapost.com/business/2022/05/20/govt-to-revert-to-palm-oil-dmo-after-lifting-export-ban.html

External Link : https://www.reuters.com/markets/commodities/indonesia-ministry-hold-briefing-lifting-palm-oil-export-ban-2022-05-20/