Refiners upset over move to boost tax-free CPO exports

KUALA LUMPUR: The government will increase the duty-free quota for crude palm oil (CPO) exports by another two million tonnes, a move which is widely frowned upon by palm oil downstream players.


Downstream players have been hoping for the government to heed their call to scrap the quota as they said it lowered the industry's competitiveness and reduced national revenue.

"It would be a sad day for the refining industry when the government is giving priority to other countries for the supply of CPO to subsidise their refining industry when we ourselves have invested billions of ringgit to build our refining and manufacturing sector," said Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad.

The plight of the refiners and others in the local downstream palm oil industry was felt more following neighbouring Indonesia's review of its export tax structure last year to boost its own refining industry.

"Instead the government must immediately focus on addressing the issue of our uncompetitiveness against the Indonesian export duty structure, which is still undecided for more than 10 months now," he said in a statement late yesterday.

Mohammad Jaaffar has appealed to the government to re-consider its decision on the additional two million tonnes.

The move was made following a recent Cabinet decision.
Plantation Industries and Commodities Minister Tan Sri Bernard Dompok could not be reached for comments but a ministry confirmed the decision was made.

Mohammad Jaffar said the ministry had assured, during the Palm Oil Lab in May, that it would propose for the suspension of CPO duty-free quota to the Cabinet.

"We are therefore very disillusioned with the announcement that the CPO duty-free quota has now been increased rather than suspended. It also gave us 'a false promise' that the government is sensitive to the well-being of the palm oil industry."

Poram, reacting to a Reuters report yesterday, said:
"Such a move will further aggrieve the ailing refining industry, in terms of the availability of CPO and also the utilisation capacity rate to less than 60 per cent, rendering the refining industry totally uncompetitive."

With the additional tonnes, this means the total allocated quota would be 5.5 million tonnes, or almost 30 per cent of total CPO production in Malaysia.

Mohammad Jaffar said the move would also mean a loss of uncollected tax to the tune of billions of ringgit.

Last year, he estimated that the government had suffered a loss of RM2.45 billion from the exports of 3.47 million tonnes of duty-free CPO.