Affected By Palm Oil DMO Policy, Oleochemical Factory Forced To Stop Production

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JAKARTA - The government's policy through the Ministry of Trade (Kemendag) regarding the obligation to supply domestic needs (Domestic Market Obligation/DMO) of 20 percent of the realization of exports, is now starting to take its toll.

One company engaged in the oleochemical sector, namely PT Sumi Asih, was forced to stop production because it was unable to fulfill its obligation to supply cooking oil as much as 20 percent of the products they would export.

"Because we cannot operate, we are also forced to lay off 350 of our employees," said PT Sumi Asih HRD and Legal Director Markus Susanto in Jakarta, as reported by Antara, Saturday, March 12.

According to Markus, the factory, which is located in Bekasi, West Java, does not use Crude Palm Oil (CPO) as a raw material for production, but RBD stearin, which is a by-product of the cooking oil factory which is then processed into stearic acid and glycerine.

According to the Minister of Trade Regulation No. 8 In 2022, oleochemical producers that will export their products are required to carry out DMO cooking oil. "This regulation certainly makes it difficult for oleochemical producers who do not produce cooking oil," complained Markus.

If they have to force themselves to fulfill the DMO obligations, continued Markus, his party is forced to buy CPO or olein at the current market price, which is Rp. 20,500 per kilogram. Only then do they sell cooking oil at a price determined by the government, which is Rp. 10,300 per kilogram.

"If it is calculated by implementing a DMO of 20 percent, the company has to bear a deficit of around Rp. 6.3 billion every month," said Markus.

The projected loss figure is based on Markus' calculation of the 30,000 tons of stearic acid and glycerine products that are exported every month, then multiplied by 20 percent, resulting in a figure of 600 tons. Then this number is multiplied by the difference that must be paid for raw materials with cooking oil of Rp9,700 per kilogram. "So yes, the estimate is around Rp. 6.3 billion," said Markus.

Not to mention if the DMO obligation is increased to 30 percent as is being prepared by the Ministry of Trade, the deficit that must be borne by the company will almost reach IDR 10 billion in a month.

The DMO regulation, continued Markus, will not have a serious impact on the integrated oleochemical industry, namely in one business group also has oil palm plantations, has a palm oil factory (PKS) that produces fresh fruit bunches (FFB) into CPO, has a cooking oil processing factory. , oleochemical factories to fatty alcohol factories, and also biodiesel plants.

“For those whose groups are integrated like that, it will be very easy to implement the DMO rules, because they also produce cooking oil. Even though he loses selling cooking oil for DMO, he can boost other products for export,” said Markus.

Meanwhile, PT Sumi Asih itself, said Markus, is no longer able to export because it has stopped production for three weeks. Meanwhile, the Indonesian Vegetable Oil Industry Association (GIMNI) firmly rejected the 30 percent DMO from the previous 20 percent.

"There's no need for 30 percent DMO. Just 20 percent and even I suggest that it goes even more smoothly, there's no need for DMO," said GIMNI Executive Director, Sahat Sinaga, on a separate occasion.

The DMO policy in GIMNI's view will actually make it difficult for exporters, and can even cause exports to be hampered.

"If exports are hampered, palm oil plantations will lose because 64 percent of our market is in foreign markets," said Sahat.