RM500m targeted from palm oil windfall tax

The revenue aim achievable if palm oil prices maintain around RM3,000-RM3,500 per tonne until April next year

by HARIZAH KAMEL / pic by RAZAK GHAZALI

MALAYSIA targets a collection of RM500 million in palm oil windfall tax for next year.

Malaysian Palm Oil Board (MPOB) chairman Datuk Ahmad Jazlan Yaakub said the target is achievable if the palm oil prices maintain around RM3,000-RM3,500 per tonne until April next year.

“If the performance of palm oil prices continues to be at today’s level until March or early April, the situation will remain stable. I expect the government will get a windfall tax of up to RM500 million, it is not impossible,” he told reporters in a press conference at MPOB’s headquarters in Kajang, Selangor, yesterday.

He said the opening of more economic sectors and the relaxation of the Movement Control Order (MCO) have led to an increase in palm oil demand and crude palm oil (CPO) prices.

The increase in exports was also supported by the government’s initiative to completely exempt the export duty of CPO, crude palm kernel oil and RBD (refined, bleached and deodorised) palm kernel oil under the Penjana initiative.

Ahmad Jazlan said CPO production for the period of April to October 2020 recorded a comparable performance or better than that for the same period in 2019, adding that the performance of CPO price was RM2,583.50 per tonne, increased by 28.6% compared to RM2,008.50 per tonne in the same period last year.

On Nov 19, the price of CPO has increased significantly to RM3,581.50 per tonne.

The CPO price at the lowest level of RM2,021.50 per tonne on May 12 has led to an increase in the price of fresh fruit bunches (FFB) to RM760 per tonne compared to RM408 per tonne in last May.

Both increases in CPO and FFB prices contribute to the income of plantation operators and smallholders, as well as the country’s export income.

Low palm oil stock contributed to the increase in CPO price as Malaysia’s palm oil final stock fell to 1.57 million tonnes in October, the lowest since June 2017 at 1.53 million tonnes.

The decline in palm oil stock levels was contributed by increased palm oil exports and declining crude palm oil production in October 2020 compared to the previous month.

Ahmad Jazlan said high exports of palm oil also played a role as Malaysia’s palm oil exports increased by 3.8% to 1.67 million tonnes in October from 1.61 million tonnes in September driven by increased demand from India, Nigeria, Ghana, Iran, Pakistan and Japan.

India imported 423,763 tonnes of palm oil in October compared to 374,553 tonnes in September, an increase of 13.1%, driven by high demand to meet local needs and to increase the country’s domestic stock in preparation for the celebration of Deepavali in November.

The performance of Malaysia’s palm oil exports to India during the period of January-October 2020 amounted to 1.97 million tonnes worth RM5.15 billion, affected by the Covid-19 pandemic, the implementation of MCO which affected the hotel, restaurant and catering business sector, which is the main consumer of palm oil in India.

Beginning in June, Malaysia’s CPO exports to India began to rise due to activities to increase stock in the country and recovery in demand due to the relaxation of the MCO and the gradual normalisation in the country.

It is projected that India will continue to import CPO from Malaysia in 2021, driven by the reduction of customs duty on CPO by India from 37.5% to 27.5% on Nov 27 which is a factor attracting importers in India.

“Increased demand from India will support palm oil prices moving into 2021. CPO demand from India is expected to reach double digits next year,” said Ahmad Jazlan.

Additionally, he said the government is also intensifying efforts to explore new markets, including the African continent, which has a large market for palm oil as a result of economic development and urbanisation, driving the demand for food products.

“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 potential for an increase in palm oil demand,” he said.