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London — Indonesia plans to hold talks with India to lower the duty on its palm oil imports from the Southeast Asian country, which have taken a knock this year due to competition from Malaysia, Indonesia's deputy minister for food and agriculture, Musdhalifah Machmud, told S&P Global Platts in an interview. At the same time, Indonesia is in the process of making some policy changes to allow the import of Indian raw sugar, she said.

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Indonesia recently agreed to import high-quality raw sugar from India.

"We hope that through communications with India, we can discuss the import duty because 50% is a lot and we have to compete [with Malaysia]," Machmud said on the sidelines of Globoil India 2019, held in Mumbai last week.

India is the largest importer of palm oil, which accounts for two-thirds of its total edible oil imports, with Indonesia and Malaysia being the major exporters.

India imported around 8.7 million mt of palm oil in 2017-18 (November-October), of which around 25% was refined palm oil.

Currently, the import duties on crude palm oil and refined palm oil from Indonesia and Malaysia are equal. Indonesia,however, wants a lower duty on its palm oil exports to India.

Indonesia usually accounts for 70% of India's total palm oil import, and Malaysia accounts for the rest.

However, Indonesia has lost some of its market share in India following the Malaysia-India Comprehensive Economic Cooperation Agreement in January.

As part of the agreement, duty on import of refined palm oil from Malaysia was reduced to 45% from 54%, while import duty on Indonesian refined palm oil was steady at 50%.

In September, India imposed an additional 5% duty on refined palm oil from Malaysia, bringing it level with Indonesiaat 50%.

Duty on crude palm oil from both countries is 40%.

"We have seen the impact [of higher relative export duty] already as exports to India decreased by 28% this year because of this duty," Machmud said.

Imports of refined palm oil from Malaysia in January-June surged to 1.57 million mt from 189,445 mt in the same period a year ago, according to a report from the Solvent Extractors Association of India.


Meanwhile, Indonesia is in the process of making some policy changes for importing sugar from India, Machmud said without elaborating.

"For sugar, we earlier used to import from Thailand and Brazil but now we import from India. We faced some problems because this is the first time we will import [sugar] from India. We have to prepare many things [for the import]," she said.

Indonesian regulations currently allow import of raw sugar with minimum ICUMSA (International Commission for Uniform Method of Sugar Analysis) level of 1,200. Indian raw sugar typically has 400-800 ICUMSA units. The lower the ICUMSA level, the better the quality of sugar.

Currently, Indonesia imports raw sugar mainly from Thailand due to a freight advantage.


On corn, Machmud said Indonesia will continue to import "specific grade corn" even as it continues with plans to reach self-sufficiency.

"We hope that we can fulfill our need for corn in Indonesia. But for the specific character we still need to import,"she said.

The country has encouraged planting through subsidies for seeds and fertilizer since 2015 and providing minimum support price since 2018. As a result, farmers have started growing more corn.

Indonesia's corn production is expected to reach 12.6 million mt in 2019-20 (October-September), up around 5% on the year, according to the US Department of Agriculture's Global Agricultural Information Network. Corn harvested area is seen at 3.9 million ha in 2019-20, as compared with 3.7 million ha forecast for 2018-19.

Domestic consumption of corn for feed in 2019-20 is forecast at 9.4 million mt, while consumption for food, seed and industrial use is forecast at 3.9 million mt.

The corn wet milling industry, with a total capacity of 580,000 mt/year, remains the primary importer of corn in Indonesia due to higher starch levels in imported feed grade corn as opposed to locally-grown flint corn.


In biofuels, Indonesia is hopeful to move to B30 biodiesel from January 2020 after the country's shift to a mandatoryB20 program in September 2018, in a bid to reduce its carbon emissions and increase palm oil consumption.

"We have already tried [B30] in the field and until now it has been very good," Machmud said.

B20 biodiesel is a blend of 20% biodiesel originating from palm oil and 80% petroleum diesel, while B30 biodiesel would be a blend of 30% of biodiesel.

The various associations of transportation in Indonesia have already announced that they are ready to utilize B30, the minister said.

It was earlier reported that the some transportation operators had objected to the move claiming that it would increase their maintenance costs.

Indonesia began road testing for B30 in May, and according to Indonesia's Ministry of Energy and Mineral Resources, the fuel has passed all aspects of the test.

-- Shilpa Samant,

-- Shikha Singh,

-- Asim Anand,

--Edited by Nurul Darni,