KUALA LUMPUR: The additional RM1 cess per tonne of palm oil produced that will be imposed by the government starting next year will lead to higher production costs for planters.
The amount will be an addition to the RM13 that industry players are already paying, on top of the various levies and taxes that have been imposed on them.
Planters will be expected to fork out around RM300mil in cess beginning next year, where the extra RM1 is for the government’s environmental agenda.
At the current RM13 that the government is already imposing, the industry is already paying at least RM273mil annually, based on current production figures.
Primary Industries Minister Teresa Kok said the additional cess collected will be parked into a specific fund to be set up by the government next year, which will be utilised for wildlife conservation purposes and green initiatives, especially tree planting.
“Malaysia is a strong advocate in the conservation and protection of the environment and natural wildlife habitat.
“Currently, my ministry has committed to plant one million forest tree species within the next few years, particularly in degraded forest land in Sabah as well as protecting the wildlife population sponsored primarily by the palm oil industry players.
“This is to show the world that the palm oil industry in Malaysia is concerned about environment and wildlife conservation, ” she told a press conference after the launch of the Malaysian Palm Oil Board’s (MPOB) International Palm Oil Congress and Exhibition here yesterday.Malaysia, being the second largest palm oil exporter, produced 19.52 million tonnes of crude palm oil (CPO) and 2.3 million tonnes of crude palm kernel oil (CPKO) last year.
As of October this year, CPO production stood at 16.99 million tonnes while CPKO recorded a production figure of 1.98 million tonnes.
Both the CPO and CPKO are subject to the current RM13 cess imposed by the government, where RM11 goes to the Malaysian Palm Oil Board (MPOB) for its upkeep and research purposes and RM2 for the Cooking Oil Stabilisation Scheme.
CIMB Investment Bank’s regional head of plantation research Ivy Ng said this will affect palm oil players because this will lead to higher costs for the planters, though it may appear minimal relative to their average cost of production of RM1,900 to RM2,000 per tonne.
“Assuming the country produces 20.3 million tonnes of CPO, then the government will collect RM20.3mil per annum from the RM1 itself, ” she said.
A spokesman of a plantation company said the additional RM1 itself would translate to an extra RM3mil cost to the company.
Plantation players are already trying to cope with increasing production costs in recent times, with players such as Kuala Lumpur Kepong Bhd (KLK) citing this as among the factors affecting their performance.
The group said its Q4 profit for the segment fall 25%, also attributed to weaker CPO and palm kernel selling prices.
It also cited higher production costs for the segment’s weaker full-year performance.
Plantation heavyweights were relatively unaffected by the announcement with KLK down four sen to RM22.50, Sime Darby Plantation Bhd up one sen at RM5.14, IOI Corp up one sen at RM4.43 and FGV down three sen to close at RM1.15.
The Bursa Malaysia Plantation Index saw 19 gainers and 13 losers yesterday.
On the Malaysian Sustainable Palm Oil (MSPO) certification, Kok said the government believes it can achieve 70% of the total planted area to be certified by February next year.
As of October, the certification level achieved was 60%, with 313 palm mills of the total 448 mills in the country already certified.
Kok also warned owners of oil palm mills and growers with plantation acreage of 100 acres or more that the MPOB will take legal action to revoke their licences if they are not MSPO-certified by Jan 1 next year.
Commenting on this, Ng said there should be a case-by-case assessment as to why land owners are unable to obtain the MSPO certification before revoking their licences.
This is because some could be facing financial constraints due to low CPO prices in the early part of this year.
Meanwhile, Kok also said that the uncertainties over Brexit was among the reasons for the delay in Malaysia’s attempt to challenge the European Union over its palm oil ban.
“They are going to have the Brexit polls in December, so we have to let them settle down first, then only we will take the next course of action, ” she said.
On the whole, the decision to file a case with the WTO will have to be discussed in a Cabinet meeting.
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