KUALA LUMPUR: The tariff change in palm oil import duty by India is a "temporary challenge" for Malaysia's resilience and the competitiveness of its palm oil export, says the Plantation and Commodities Ministry.
"From experience, these tariff changes are usually temporary, and their impact on Malaysian palm oil... is only short-term," it said in a parliamentary written reply to Datuk Seri Hamzah Zainudin (PN-Larut) on Thursday (Dec 12).
Hamzah wanted to know the government's short-, medium- and long-term strategic measures to address effects on the palm oil industry following India's 32% hike in import duty and the reduction in export levy rates by Indonesia.
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Highlighting India's critical role as the world's largest palm oil importer, the ministry said that country's demand for palm oil will remain robust with a burgeoning population of 1.45 billion, ensuring continued market access for Malaysian products.
The ministry also clarified that India's import duty increase, termed effective import duty, has elevated rates for crude palm oil (CPO) from 5.5% to 27.5% and for processed palm oil from 13.75% to 35.75%.
"This includes the basic import duty plus additional taxes such as agriculture infrastructure development cess and social welfare cess.
"It is part of India's efforts to protect domestic oil prices and support its agriculture industry," the ministry added.
To counteract the immediate impact, it said Malaysia is leveraging strategic trade agreements.
"Malaysia has a long-term strategy through the Asean-India Free Trade Agreement (AIFTA) and the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) that limits the increase in India's import duty for CPO to 37.5% and for processed palm oil to 45%.
"If necessary, Malaysia could also consider exempting export duty on CPO as a long-term measure to maintain competitiveness," it said.
Moreover, the ministry said it is actively promoting Malaysian Sustainable Palm Oil (MSPO) certification in the Indian market, emphasising its quality and sustainability over price changes, signalling a targeted approach towards younger, more environmentally conscious consumers.
The ministry noted that the reduction in export levy by Indonesia also presents a competitive challenge within the global market.
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However, it said Malaysia remains steadfast in its commitment to producing sustainable and high-quality palm oil.
"Initiatives are underway to bolster the industry's competitiveness through research and development, focusing on high-value-added products like bioplastics and biofuels."
Despite challenges, the ministry said India's import tariffs increase and Indonesia's export levy reduction are part of the usual changes in the global palm oil trade.
"Malaysia's palm oil exports to India have shown a significant increase, demonstrating the effectiveness of the country's strategic measures.
"From January to October, exports grew by 16.4% to 2.67 million tonnes compared to the same period last year, underscoring the industry's resilience and the enduring demand within the Indian market," it said.
The ministry noted that it is committed to navigating fluctuations in global trade policies while securing a sustainable and profitable future for the palm oil industry.
"Malaysia remains committed to ensuring the industry remains competitive through a solid long-term plan, including international trade cooperation and the promotion of sustainable products like MSPO," it added.
