Based on Kompas.com's records, since the end of 2021, cooking oil supplies in Indonesia have experienced a drastic decline and price hike. Facing this phenomenon, the Ministry of Trade of the Republic of Indonesia (Kemendag RI) has set a series of policies, starting from determining the Highest Retail Price (HRP) to Domestic Market Obligation (DMO) and Domestic Price Obligation (DPO) starting January 27, 2022. DMO is a policy that requires all migrant producers who do export to allocate 30% of their production volume for domestic needs, while the DPO is applied to regulate the price of crude palm oil (CPO) in the country. With the enactment of the HRP policy of Rp. 14,000/liter with the difference in prices in several packaging variations, cooking oil supplies are increasingly becoming scarce as cooking oil prices fall in the market.
Recent developments in the government's attempts to ensure the availability of cooking oil have now led to the revocation of the HRP for packaged and bulk cooking oil and the revocation of the DMO and DPO policies. The revocation of the cooking oil HRP policy by the government aims to get a new balance through the market mechanism. The government also reported that with the implementation of DMO policy some time ago, producers found it difficult to ensure supplies of cooking oil due to higher CPO prices than HRP so that several oil processing factories were forced to close because they could no longer run their factories. The consequence of the revocation of the policy is the return of the domestic packaged cooking oil price to the world CPO price of Rp. 24,000/liter. Along with the revocation of the HRP, currently cooking oil supplies have returned to normal and are nearing an abundance. Based on information obtained from several sellers (18/3/22), the number of store requests for cooking oil needs has been met up to 100%.
In line with the revocation of the HRP, DPO, and DMO policies, the Government established a policy of increasing CPO export rates with the aim of ensuring that cooking oil raw materials are still available domestically. According to the Indonesian Minister of Trade, when the CPO price is above the level of US$1,000 per tonne, there will be a flat tariff of US$175 and for every CPO price increase of US$50 per tonne, there will be a tariff increase of US$20 per ton for CPO. Therefore, the export levy plus export duty from the original US$375 per tonne will change to US$675 per tonne. Hence, exporters will most likely choose to sell CPO domestically rather than abroad because it will be more profitable. This mechanism is considered to be able to maintain the stability of domestic supply.
