Budget boon for smallholders

This is written by my colleague Koi Kye Lee.

PUTRAJAYA: THE RM432 million allocation for independent smallholders to embark on new plantings and replanting of their unproductive oil palm trees will have a big impact on the palm oil industry.

Deputy Plantation Industries and Commodities Minister Datuk Hamzah Zainuddin said the allocation would help generate and transform the palm oil industry, which is divided into upstream and downstream activities.

"With this allocation, the ministry will be able to use it to strategise and raise palm oil yield," he said after flagging off the ministry's Walk for Health event yesterday which saw the participation of some 7,000 people.

Hamzah said the price of the commodity in the global market had seen a slight decline due to several factors.

"One of the reasons is the slow economic growth in Europe, while in America, soy production and demand for soy oil has increased, causing a drop in the demand for palm oil.

"However, the demand for cooking oil will see an increase towards the year-end because of the festive celebrations, especially Deepavali and Christmas. So, these will be the push factors for increasing palm oil prices in the market."

During the tabling of the 2013 Budget on Friday, Prime Minister Datuk Seri Najib Razak had proposed a RM432 million allocation for independent smallholders to embark on new plantings and replanting of their unproductive palm trees.

The allocation under the Budget works out to be RM7,500 a hectare for oil palm land in Peninsular Malaysia and RM9,000 a hectare in Sabah and Sarawak. According to the Malaysian Palm Oil Board, there are around 170,000 independent smallholders in Malaysia. With 700,000ha, they account for 14 per cent of the country's five million hectares of oil palm land.

This government subsidy to help smallholders to replant is meant to raise the annual national oil yield, which has been stagnating at below four tonnes a hectare over the last two decades. It is hoped that by 2020, the annual fresh fruit bunch yield would improve to 26.2 tonnes a hectare from 21 tonnes currently. 

The RM432 million allocation is expected to benefit some 170,000 independent smallholders in the country and those who own 40ha or less are eligible for the replanting grant.

As for new plantings, the incentive can only be accorded to those who own up to 5ha in Peninsular Malaysia and a maximum of 7ha for those in Sabah and Sarawak.

The 2013 Budget also proposes RM127 million allocation for the development of high-value oleochemical derivatives to transform the downstream industry towards higher production of value added detergent, lubricants and bio-plastics. Basically, this is a continuation of the government's commitment to incentivise integrated plantation firms to move further downstream.

Cooking oil is a price-controlled item. In order to cap retail price at RM2.50 a kg, the government is maintaining its annual subsidy for this staple cooking ingredient at RM1.5 billion.