JAKARTA – The Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono said that changing the domestic market obligation (DMO) of crude palm oil (CPO) from the current export-based scheme to production-based scheme will actually burden the smallholders.
“The current DMO scheme is based on palm oil exports, so it is limited to the producers-cum-exporters only. If it is changed to production-based scheme, it means the smallholders will be also burdened as they are also producers,” Eddy Martono said in Jakarta on Monday.
Eddy was commenting on the statement made by Deputy III of the presidential chief of staff (KSP), Edy Priyono who proposed to change the palm oil DMO scheme from export-based scheme to production-based one. “Apparently, the export-based scheme is not effective. Due to low export performances during the last few months, the realization of DMO is low, causing a shortage of CPO supply for cooking oil production at domestic market,” he said.
Edy Priyono said that as the DMO policy is based on the volume of exports, its realization is heavily determined by the fluctuations of exports to the international markets.
“We thought that our palm oil DMO policy is already a good one. But now we’ve found that it is not effective. Currently, as exports dropped, the realization of DMO also dropped. The low realization of palm oil DMO will lift the price of cooking oil at domestic market. But actually the DMO policy is aimed to ensure the cooking oil is affordable in price and available for the public at the local market,” Edy said on Monday (25/3/2024) during a coordination meeting on regional inflation control.
In January 2024, the realization of palm oil DMO was only 212,116 tons or 70.7% of the monthly target set at 300,000 tons. During that period Indonesia’s palm oil exports reached 1.89 million tons.
In February 2024, the DMO realization was only 43.8% or 131,486 tons. During the period, Indonesia’s palm oil exports reached 1.01 million tons.
So far in March 2024, the DMO realization was only 28.6% or around 85,890 tons.
The government, through the trade ministry (Kemendag), has set the ratio of palm oil DMO and exports for producers-cum-exporters at 1:4 since May 2023. It means, palm oil producers can export at the volume of 4 (four) times of the obliged DMO volume.
“Therefore, we propose that the DMO policy should be based on production volume rather than on export volume. So, producers are obliged to allocate a certain percentage of their production volume for DMO,” he said.
But GAPKI Chairman Eddy Martono said that as smallholders are also producers, there is a need to make a new category of producers.
“Currently, the DMO is based on exports. If it is changed to production-based scheme, there should be a new category of palm oil producers that are obliged to comply with the DMO policy. If all producers are obliged, then it will only burden the smallholders,” he said on Monday (25/03/2024).
He said that the current low realization of palm oil DMO is caused by the stagnant exports. The price increase of cooking oil, especially bulk cooking oil and MinyaKita, occurred along the chains of distribution, not of producers. “If the exports drop, then the DMO also drops,” he said.
Bambang Wisnubroto, Director of Basic Necessities and Essential Goods at the trade ministry, said that the export decrease was mainly caused by the price decrease of other vegetable oils, such as soybean and rapeseed, making palm oil as their competitors more expensive. “In such condition, importers will choose to buy the cheaper vegetable oils,” Bambang said.
According to him, based on the fact it is now necessary to change the palm oil DMO application from the current export-based scheme to production-based scheme to ensure the availability of CPO supply for cooking oil production at domestic market.
But the trade ministry’s National Trade Director General Isy Karim said that actually the proposal from the KSP to change the palm oil DMO scheme is just a discussion, and not yet a decision. “The DMO based on production could make the local supply of CPO for cooking oil more stable. But it’s only a discussion so far. It needs a thorough assessment before making it a final decision. For the time being, the DMO is still based on export volume,” he said in Jakarta on Wednesday