Palm | Kelapa Sawit

JAKARTA, Nov 13 (Reuters) - A proposed tax increase on palm oil in food in France, dubbed the "Nutella tax", should not go ahead because health fears associated with the edible oil do not stand up to scrutiny, an industry group in top producer Indonesia said on Tuesday.

The tax would rise to 400 euros ($510) a tonne from 100 euros if the proposal floated by a Senate committee this month secures majority backing in the Senate and in the lower house of France's parliament, the National Assembly.

The makers of Nutella said on Saturday they would not change the lucrative recipe even if France, its biggest market, endorsed the proposal

The use of palm oil has been met with increased public opposition in France and other Western nations due to deforestation and to allegations it can cause health problems.

"It is wrong," Sahat Sinaga, executive director at the Indonesian Vegetable Oil Association (GIMNI) told Reuters. "It is not a new issue. I don't think they will pass this law."

Similar palm oil health warnings gained heavy publicity in the United States decades ago and had subsequently been disproved by academic research, he said.

"Let's again do research into the health (impacts)," said Sinaga, a former employee of Unilever. "From a technical and scientific point of view, this is not correct."

The main ingredients of Nutella food spread are sugar, palm oil, milk powder, hazelnuts, cocoa, emulsifier and flavouring. According to Nutella's website, more than 100 million jars were sold in France in 2008.

Sinaga's comments echoed those on Monday by Malaysian Palm Oil Council chief Yusof Basiron, who said the French tax proposal threatened the livelihoods of more than 240,000 small farmers.

In a statement, Basiron urged the French government to reject the proposal, which he said could significantly undermine the competitiveness of France's food industry.

Palm oil, the world's most traded and consumed edible oil, is used mainly as an ingredient in food such as biscuits and ice cream, or as a biofuel.

Indonesia and Malaysia account for about 90 percent of global palm oil production of around 50 million tonnes.

While emerging markets such as India and China dominate palm purchases globally, Europe is also a large buyer.

Sinaga, whose association has 30 members who account for 65 percent of refining capacity in Indonesia, said he was worried that other countries might follow France's lead.

Asked about other challenges facing the palm industry, Sinaga said modernising Indonesia's state-owned ports was crucial to handle the rapidly expanding refined palm oil output.

He said that if the three main state-owned ports in Belawan and Dumai in Sumatra and Jakarta did not modernise, palm stocks levels in Indonesia would rise next year.

"We want the port facilities to improve their pumping capacity," added Sinaga. "It is now an average of 600 tonnes per hour and should be 1,000 tonnes per hour."

Indonesia slashed export taxes for processed oil in October last year in an effort to boost investments in processing and create more jobs in the industry.

Previously, the archipelago had focused on increasing plantations, which currently cover about 8.2 million hectares.

Palm oil refinery capacity in Indonesia will rise 21 percent this year to 25 million tonnes, Sinaga said last week.

Malaysia, the world's no. 2 palm producer, last month said it would cut export taxes next year. (Full Story)

The Indonesian Palm Oil Association, which represents mostly plantation firms, last week called on the Indonesian government to reduce palm oil export taxes to gain greater parity with Malaysia and safeguard shipments to top buyer India.

Highlighting a spilt in the industry, Sinaga reiterated his call for the Indonesian government not to make any change the current export tax regime as consistency is better for business.