CPO DMO Policy Starts to Eat Victims, Oleochemical Factory Stops Production

JAKARTA, KOMPAS.com – Domestic supply obligation policy or domestic market obligation (DMO) which is accompanied by a price fixing or domestic price obligation (DPO) crude palm oil (CPO) or palm oil takes its toll.

PT Sumi Asih, a company engaged in the oleochemistry was forced to stop production because it was unable to fulfill its supply obligations cooking oil as much as 20 percent of the products to be exported.

Because it cannot operate, the factory, which is located in Tambun, Bekasi, West Java, has laid off 350 of its employees.

Also read: Palm Oil Industry Players Reject 30 Percent DMO Policy, Why?

“In detail, 300 employees work in the factory and 50 employees at the head office. They have been home for three weeks. Because they were laid off, they held a demonstration,” said PT Sumi Asih Director of HRD and Legal Markus Susanto in a press release, Saturday (12/3/2022).

Markus Susanto explained that the factory does not use CPO as a raw material for production, but uses RBD stearin to then be processed into stearic acid and glycerine. RBD stearin is a by product or by-products of cooking oil factories.

It is known, Permendag No. 8 of 2022 requires oleochemical producers who will export their products to carry out the DMO of cooking oil. This rule certainly makes it difficult for Sumi Asih, who does not produce cooking oil.

“So the rule is impossible for us to do. I even begged to the cooking oil factory to buy cooking oil which we will use to fulfill our DMO obligations, but no one wants to give it because they themselves also need it,” complained Markus.

Also read: Ministry of Industry Affirms Food Industry Not to Use DMO Palm Cooking Oil

In fact, said Markus, if Sumi Asih fulfills the DMO obligation, her party must buy CPO or olein at the current market price of Rp 20,500 per kilogram. Then his party must sell cooking oil at a price determined by the government of Rp. 10,300 per kilogram.

If calculated by implementing a DMO of 20 percent, Sumi Asih will each month bear a deficit of around Rp. 6.3 billion.

“This figure comes from the 30,000 tons of stearic acid and glycerine products that we export every month, multiplied by 20 percent, which means 600 tons. Now, 600 tons multiplied by the difference that we have to pay for raw materials and cooking oil, IDR 9,700 per kilogram equals IDR 6.3 billion,” he explained.

“Now the DMO is 30 percent, it means that our deficit is almost Rp. 10 billion in a month. Meanwhile, our margin is not that much,” he continued.

According to Markus, the DMO regulation does not have a serious impact on the integrated oleochemical industry. For example, the industry 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, an oleochemical factory to a fatty alcohol factory, and a biodiesel factory.

“For them it will be very easy to implement the DMO rules, because they produce cooking oil. Even though he loses selling cooking oil for DMO, he can boost other products for export,” he said.

Markus revealed, because it has been three weeks without production, his party also cannot export.

“We as Indonesians are really ashamed, our credibility has been destroyed in the international world. I can’t export for a month now. Buyer-buyer I in China, the Philippines and in Europe want to sue in arbitration,” he said.

Meanwhile, the Indonesian Vegetable Oil Industry Association (GIMNI) rejected the 30 percent DMO from the previous 20 percent.

“You don’t need 30 percent DMO, just 20 percent and I even suggest that it goes even smoother, there’s no need for DMO,” said GIMNI Executive Director Sahat Sinaga.

According to him, this policy will actually make it difficult for exporters, and can even cause exports to stall.

“If exports are blocked, palm oil plantations will lose because 64 percent of our market is in foreign markets,” he said.

So, said Sahat, there should not be an imbalance in the global market which causes supply and demand prices to decrease slightly.

“Moreover, recently we have also experienced difficulties in exporting, so prices have soared,” he added.

Also read: Until When Cooking Oil Rare and What Causes It?

Regarding the turmoil of cooking oil, Sahat said that since there was a domestic cooking oil problem, exporters had made a real contribution in helping the community.

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