Additional CPO cess being studied

Growers to be consulted on proposed RM5 per tonne

BANGI: The Malaysian Palm Oil Board (MPOB) has clarified that its proposal for an additional RM5 cess per tonne for crude palm oil (CPO) is still under study and will only be implemented after prior consultations with oil palm growers.

MPOB chairman Datuk Ahmad Jazlan Yaakub said the RM5 additional cess, on top of the existing RM14 cess, will only be imposed on a one-off basis next year.

“Not only that, the additional cess will be imposed only if CPO prices go above a certain level. Today, CPO prices are at multi-year-high levels.

“The collected cess will be returned to the palm oil industry through programmes and initiatives aimed at enhancing the industry’s sustainability and competitiveness,” he told reporters during a press conference yesterday.

Earlier, the Malaysian Estate Owners’ Association (MEOA) urged for the MPOB Cess Order 2020 to be postponed from its current Jan 1, 2021 implementation date. It said the decision to levy additional cess must be preceded by consultations with oil palm growers.

Maybank IB Research said the RM5 cess will likely have a small earnings impact on the industry. However, it described the additional levy as “an added burden to one of the most taxed sectors in Malaysia”.

“Based on our back-of-the-envelope estimates, MPOB is likely to collect about Rm100mil in additional cess in 2021.

“The RM5 per tonne cess is about 0.15% of MPOB’S spot price of RM3,430 per tonne (Nov 26), or 1% of the industry’s estimated 2020 net profit,” the research house said in a note.

Meanwhile, Ahmad Jazlan pointed out that the country’s windfall tax from the palm oil industry is expected to surge by over 1,300fold this year, thanks to the higher CPO prices.

In 2020, the government is estimated to collect Rm348mil in windfall tax from the industry as compared with the meagre RM258,000 in 2019.

Looking ahead into 2021, Ahmad Jazlan is optimistic that the windfall tax collection

could likely be even higher, reaching as high as Rm500mil if CPO prices remain above RM3,000 next year.

“The expected revenue of Rm348mil for this year is an estimate based on increased CPO prices since June 2020. Assuming CPO prices next year from March onwards remain high above RM3,000 per tonne, it is not impossible to hit a collection of Rm500mil,” he said.

In Peninsular Malaysia, a windfall tax of 3% is imposed when the CPO prices are above RM2,500 per tonne.

Meanwhile in Sabah and Sarawak, the windfall tax is imposed at 1.5% once the CPO prices are above RM3,000 per tonne.

Ahmad Jazlan, who is also Umno’s Machang MP, foresees CPO prices remaining above RM3,000 per tonne by end-2020 and in 2021.

He pointed out that CPO touched RM3,581.50 per tonne on Nov 19, which is the highest level since 2012.

“The performance of the CPO price for the period of January to October this year, which was RM2,583.50 per tonne, increased by RM575 or 28.6% compared with RM2,008.50 per tonne in the same period in 2019,” he said.

According to Ahmad Jazlan, the high price of CPO over the past few months was partly contributed by the confidence of other trading countries in the Perikatan Nasional government.

The current government’s good diplomatic relations, especially with key CPO buyers such as India and China, have led to stronger exports on a year-on-year basis and as a result, lifted CPO prices.

This is further supported by the government’s initiatives to completely exempt the export duty on CPO, crude palm kernel oil and RBD palm kernel oil under the Penjana stimulus package.

“The increase in CPO and fresh fruit bunch prices contributes to the income of plantation operators and smallholders, as well as the country’s export income.

“Among the factors that led to the higher prices are low palm oil stocks, low palm oil production, high exports of palm oil and the rising oil prices of competitors,” stated Ahmad Jazlan.

Moving forward, he said the government is intensifying its efforts to explore new export markets for Malaysian palm oil, including the African continent.

“The African continent has the potential to be one of the world’s largest consumers of palm oil besides China and India.

“Angola, Mozambique and Algeria are among the markets identified as the potential for an increase in palm oil demand,” added Ahmad Jazlan.