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Indonesia, the primary supplier of palm oil to India, is preparing for a comprehensive overhaul of its export policy effective January 1, 2027. The proposed framework includes placing exports under state control, introducing new service fees, and significantly increasing domestic consumption through a 50% biodiesel blending mandate (B50).
As Indonesia diverts more palm oil toward its domestic energy sector, global supply chains are expected to face tightening conditions. This shift is likely to drive international prices higher, presenting fresh logistical and financial hurdles for Indian edible oil importers. Alongside these shifts, Jakarta is introducing new commodity pricing benchmarks and more stringent sustainability regulations to address environmental concerns and production risks.
Under Trade Ministerial Regulation (Permendag) No. 16/2026, Indonesia will implement a centralized export system. This mandate covers crude palm oil (CPO), refined products, used cooking oil, and palm residues, limiting export activities to designated state-owned enterprises. PT Danantara Sumberdaya Indonesia (DSI), a subsidiary of the national sovereign wealth fund, will manage export contracts and customs documentation to curb tax leakage and under-invoicing.
Furthermore, a new export service fee will be introduced in early 2027. While the exact rate is pending, officials indicate a single-digit dollar amount per tonne. Existing Domestic Market Obligation (DMO) requirements will remain mandatory, forcing exporters to either meet local supply quotas or transfer their export rights to state entities to secure clearance.
On the energy front, the B50 biodiesel mandate—launched in July 2026—is set for full supply-chain integration by 2027. This initiative aims to reduce reliance on imported fossil fuels and expand into sustainable aviation fuel. To further decouple from international volatility, the Strategic Minerals and Commodities Exchange (BMKS) will launch in January 2027 to establish an Indonesia Reference Price, reducing dependence on benchmarks from Malaysia and Rotterdam.
For India, these policy shifts necessitate a strategic pivot. The Solvent Extractors' Association of India (SEA) is currently exploring alternative sources, such as Colombia, to mitigate regional dependency. Indian stakeholders are also expected to accelerate domestic oil palm cultivation to safeguard supply-chain security against potential price hikes and supply disruptions similar to the 2022 export ban.
Source: Jagran Josh