Levelling the playing field

By Rupinder Singh and Ooi Tee Ching

KUALA LUMPUR: Palm oil prices yesterday fell RM23 to close at RM2,500 per tonne as traders take heed that Malaysia will only adopt the new crude palm oil (CPO) tax regime and do away with duty-free export quotas from January 2013 onwards.

For the past week, palm oil price recovered from a low of RM2,255 per tonne when news reports of a possible cut in CPO tax first emerged.

Yesterday, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok announced the Cabinet has decided to adopt a flexible CPO export tax structure that mimics that of Indonesia's. At the same time, Malaysia will also abolish duty-free CPO export quota.

"We want to create a situation to ensure that downstream players in Malaysia have a level playing field and they won't suffer in the hands of refineries from another country," he told reporters after the launch of the Malaysia Cocoa and Chocolate Day here yesterday.

He explained that the new CPO export duty will fluctuate on a monthly basis, between 4.5 per cent to 8.5 per cent, from 23 per cent currently.

"If palm oil price hovers between RM2,250 to RM2,400 a tonne, the tax is 4.5 per cent. And if palm oil price were to jump to RM3,450 per tonne, the tax is 8.5 per cent," the minister said.

He also confirmed that refined palm oil will remain tax-free.

In addition to this measure, Dompok said, his ministry is in consultation with relevant parties to assess the viability of implementing the B10 Programme (blending of 10 per cent palm biodiesel with petroleum diesel) for the unsubsidised sector. 

"This measure could increase the consumption of CPO by another 300,000 tonnes a year," he said.

Currently, the B5 Programme (blending of 5 per cent palm biodiesel and 95 per cent of petroleum diesel) is ongoing in the central region covering Selangor, Malacca, Negeri Sembilan and the Federal Territories of Kuala Lumpur and Putrajaya; consuming some 112,000 tonnes of CPO annually.

Dompok also said that the government is committed in its ongoing efforts to incentivise replanting of old and unproductive oil palm trees. It was estimated that the replanting of 100,000ha will reduce CPO supply by 300,000 tonnes.

"We will continue with measures to ensure the growers receive remunerative income. The smallholding sector accounts for 40 per cent of five million hectares of oil palm in the country," he said.