Govt urged to abolish duty free quota on CPKO

KUALA LUMPUR: MALAYSIA'S palm oil downstream players have appealed to the government to abolish duty free quota on crude palm kernel oil (CPKO) and waive the five per cent duty on refined, bleached and deodorised palm kernel oil (RBD PKO).

Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad acknowledged that while the government had lowered crude palm oil (CPO) tax at the start of this year, it has yet to consider other requests put forward by downstream players.

"Right now, RBD PKO is the only refined product in Malaysia that is still being taxed," he said.

Jaaffar said Indonesia's move to lower export duties on refined oils and fats in September 2011 had eroded Malaysia's RBD PKO export competitiveness. Currently, Indonesia does not impose any RBD PKO tax, while Malaysia has a five per cent duty.

"Since Indonesia does not have any tax on RBD PKO, refiners here are at a disadvantage. We face unfair competition and loss of business opportunities," he added.

Last year, only 258,640 tonnes of RBD PKO were exported, 40 per cent less than 363,690 tonnes in 2011.
Jaaffar was speaking to Business Times on the sidelines of the Palm and Lauric Oils Outlook Conference (POC2013) here yesterday. "Since we have not been able to export our RBD PKO competitively, there's less demand for CPKO. This continues to pull the CPKO prices down," he explained.

More importantly, Jaaffar said downstream players are also appealing to the government to abolish the export quota on duty free CPKO.

If the government were to do so, both oleochemical and specialty fats manufacturers will be able to procure CPKO from the market at a 10 per cent cheaper pricing. "This is what we want and it will be good for all downstream players," he said.

Among the specialty fats producers that support abolition of duty-free CPKO quota are IOI Loders Croklaan, Premium Vegetable Oils, Cargill, Sime Darby Kempas, Intercontinental Specialty Fats and Fuji Oil.

Specialty fats are used by food companies to make margarine, coffee creamer, bakery fats, chocolate, ice cream, non-dairy cheese and infant milk.

In a separate interview, Malaysian Oleochemical Manufacturers' Group (MOMG) chairman Tan Kean Hua said its members use as much as 1.2 million tonnes of CPKO a year.

"We prefer the 10 per cent tax on CPKO to remain unchanged. We need all the CPKO there is at competitive pricing. As for RBD PKO, we have no objection for the five per cent tax to be waived," he said.