Oil palm planters may get cess respite from Govt

I believe my planter friends working abroad will be glad to be updated if they have missed reading the news reported in today thestar online:

The Government is considering a reduction in the Malaysian Palm Oil Board cess payment or even suspend it for a certain period to assist planters in dire straits.

Primary Industries and Commodities Minister Datuk Peter Chin Fah Kui said the Government was willing to look into these options if there was justification that “the cess is truly burdening local planters” given the sharp fall in crude palm oil (CPO) prices.

“I am a reasonable minister. Give me the breakdown on the planters’ respective cost of production and at which CPO price level would these planters hit rock bottom. If necessary, we will audit them,” he told StarBiz in an interview.

Based on annual CPO production at 18 million tonnes and palm kernel production at two million tonnes, the total cess collection is estimated at RM220mil.

Local oil palm planters have been paying about RM11 per tonne in MPOB cess (see table for breakdown).

They also had to pay an additional cess of RM4 per tonne for the Palm Oil Price Stabilisation Fund.

MPOB’s revenue was mainly from cess collection (research and development and licensing enforcement) of RM9 per tonne of palm oil and palm kernel oil produced at the mills and crushers.

Chin, however, said: “To do away with the MPOB cess is like asking us to do away with MPOB, the central body, which takes care of the well-being of the local palm oil industry.”

Citing an example, he said a reduction of 13.3% in MPOB cess provided only about 40 sen savings for every tonne of fresh fruit bunches (FFB) produced.

This would mean the cess of RM11 per tonne of CPO will be reduced to RM9 per tonne while in FFB terms, the cess will be reduced from RM2.20 per tonne to RM1.80 per tonne.

However, Chin said, there was an imposition of a sales tax of 7.5% in Sabah and 5% in Sarawak.
In fact, a reduction of 13.3% in sales tax in Sabah, for example, would provide a higher savings of RM3 for every tonne of FFB produced, he added.

Chin said the Government was looking at various avenues to mitigate the plight of oil palm planters, especially smallholders, due to the weak CPO prices and excess palm oil inventory at 2.3 million tonnes.

“We have counteracted immediately by allocating RM200mil for replanting activities and RM200mil for biofuel initiatives,” he added.

Chin said the Government’s early intervention had stabilised the CPO prices at RM1,500 to RM1,600 per tonne currently.