By Rakesh Neelakandan
Indonesia, the world’s biggest exporter of palm oil had recently hiked the tariffs applicable for Crude Palm Oil and halved export duties for refined palm oil.
This made it unattractive for buyers of crude palm oil to import, and India being one of the biggest importers of crude palm oil has found it more attractive to import refined palm oil: it turning out to be relatively cheaper.
But, this has negatively affected the prospects of Indian edible oil refiners.
Coal export tax
Following this, Indonesia is now mulling imposition of taxes on the coal sector. The country is the biggest exporter of thermal coal in the world and Indonesian coal output is expected to hit 340-354 million tonnes for 2011, as per industry group estimates.
India, China and South Korea are the biggest importers and many a company has pumped in gigantic amounts of money into the Indonesian coal sector to secure power supplies in their respective countries.
However, Indonesia may not get the tax implemented as there would be pronounced opposition, not only from the industries, but also from political parties.
The tax structure may render Indonesia an unattarctive destination and may alienate investor community, many fear.
The companies who have channelled money into the coal sector in Indonesia have already invested heavily, so much so that, it would be impossible for them to pull the plug and retrieve money. They are already entrenched.
"An export tax is a very long way away," said Supriatna Suhala, executive director of the Indonesian Coal Mining Association, to Reuters . "First the government has to revise the law, then re-negotiate contracts -- so it cannot be implemented in the near future."
The nation is also planning a regulation that would by 2014 require coal producers to upgrade low-quality coal to a medium-quality coal before exporting.
This may prompt further value addition in the segment.
Cocoa tax
Currently, Indonesia is also being prompted by cocoa processors to impose taxes on cocoa cakes in addition to cocoa beans which is already in place.
“The government’s aim to impose the export tax was to secure the cocoa beans for the local cocoa processing plants. But in reality, those local grinders are still dormant because they could not compete with the big ones, which are coming to Indonesia to develop their processing plants here, following the application of cocoa export tax in April last year,” Zulhefi Sikumbang, the chairman of the Indonesian Cocoa Association (Askindo), said to Agro Asia News.
This in turn is nudging cocoa processors to stress for tax implementation, the implications of which has to be studied.
Meanwhile, India government is reportedly planning to hike the taxes on refined palm oil to save the domestic processors. Raising taxes on refined palm oil would render it unattractive to buy refined palm oil from Indonesia and instead incentivize importers of the same to opt for crude palm oil from Indonesia or Malaysia.
With inflation burning the wallets of consumers in emerging markets, along with protectionism—which at times is ruling the roost-- the commodity tax structures in different nations may come under pressure in coming months.
