Behind Indonesia's Palm Oil DMO Revision Idea

The Presidential Staff Office (KSP) has proposed a change in the formula for the Domestic Market Obligation (DMO) of crude palm oil (CPO), shifting it to be based on production volume. Edy Priyono, KSP Deputy, stated that the current DMO regulations, which rely on export volume as the basis, would pose challenges when international demand for CPO weakens, as is the case presently. "The primary source of the problem is the low exports. So far, policies we have considered adequate become vulnerable when exports decrease," he said on Mar. 25.

The plummeting realization of DMO would drive up the prices of bulk cooking and cheaply packaged oil under the government's MinyaKita program in the retail market. However, according to Edy, the absorption of DMO fundamentally serves as the government's effort to ensure the affordability and supply of cooking oil domestically.

Since May 2023, the Indonesian government has implemented a CPO export ratio of 1:4 in the DMO policy, meaning producers can export at a volume four times greater than the DMO allocation. The government provides incentives for DMO in the form of multiplier oils, with a ratio of two times for pillow-packaged oil and 2.25 times for packaging other than pillows.