MPOB likely to raise RM100m in additional cess in 2021 – Maybank IB Research


THE Malaysian Palm Oil Board (MPOB) is likely to raise RM100 million in additional cess next year with the proposed cess increase of RM5 for every tonne of crude palm oil (CPO) and crude palm kernel oil for a year, effective January 2021.

Maybank Investment Bank Research (Maybank IB Research) said the additional cess would be used for research and development on palm oil mechanisation and automation to ensure sustainability and survival of the sector.

“The industry has been suffering from stagnating CPO yields for the past 45 years with an average national yield of 3.67 tonne per hectare a year, in part due to the shortage of workers.

“Higher yields are needed to help arrest the rising cost of production,” it said in a statement today.

The research house also estimated that the additional cess would be -0.15 per cent of MPOB’s spot price of RM3,430 per tonne or -1 per cent of the industry’s estimated 2020 net profit.

Although the impact seems to be small given the current high CPO price, it said this was nonetheless an added burden to the industry which had been one of the highest taxpayers in the country with effective tax rates in excess of 30 per cent.

“The industry has long called for a review of the existing windfall profit levy to raise the existing thresholds which have been in place for more than a decade while production costs have been rising steadily,” it said.

For now, the research house said, the industry was seeking the government’s help to resolve the severe shortage of workers in Malaysia, which had led to crop losses following the temporary freeze on the hiring of foreign workers to contain the spread of the COVID-19 pandemic.

It also noted that the industry’s output potential may be severely curtailed in 2021 if there were insufficient workers ahead of the next seasonal peak harvest in the second half of 2021.

“Therefore, if the new cess results in an improvement in mechanisation and automation, it will be worth every sen,” it said.

It added that MPOB also welcomed public feedback on the draft of the Malaysian Palm Oil Board (Cess) Order 2020 until today (Nov 30).

The plantation industry has been paying an additional cess of RM1 for every tonne this year meant for green initiatives to bring total cess payment to RM14 per tonne.