KUALA LUMPUR (Feb 22): Plantation associations say today they are surprised by the government's decision to raise the cess levied on crude palm oil (CPO) and crude palm kernel oil (CPKO).

A joint statement signed by nine industry associations said there was no engagement with the industry over the latest increase in cess, which is now RM16 per tonne, from RM14 previously. The cess was last increased in 2019 to RM14, from RM13 previously.

The associations estimated that the RM2 increase will add RM44 million to the Malaysian Palm Oil Board's (MPOB) cess coffers. This calculation is based on every RM1 increase equating to RM22 million per year from palm oil growers.

In short, the industry will end up contributing about RM344 million per year to MPOB.

The associations comprised the Malaysian Palm Oil Association (MPOA), Malaysian Estate Owners’ Association (MEOA), National Association for Smallholders Malaysia (NASH), the Federation of Palm Oil Millers Associations of Malaysia, Sarawak Oil Palm Plantation Owners Association (SOPPA), the Palm Oil Refiners Association of Malaysia (Poram), Malaysian Oleochemical Manufacturers Group (MOMG), the Malaysian Agricultural Producers Association (MAPA), and the Incorporated Society of Planters (ISP).

The associations also expressed concern about earlier engagements at the end of 2020 to increase the cess, which would be used for a mechanisation and automation consortium, Mechanisation and Automation Research Consortium of Oil Palm (MARCOP). The associations also stated that under Budget 2021 a matching grant of RM30 million was provided for mechanisation.

“In light of the gazetted additional cess of RM2 to be collected as per MPOB Cess (Order) (Amendment) 2021, there must not be another additional and new cess for the purpose of MARCOP,” the associations viewed.

However, the associations said they approve that RM30 million from the new MPOB cess order be channelled as seed funding to kick-start MARCOP. This would be combined with the RM30 million matching grant listed by the government under Budget 2021.

The associations also viewed that the government’s matching grant must not be derived from the same pool of MPOB cess funding.

Additionally, the associations appealed to the government to channel a slice of the consolidated pool of the windfall profit levy (WPL) collected from oil palm growers for the purposes of sustaining MARCOP. They highlighted that former MPOB chairperson Datuk Ahmad Jazlan Yaakub had said the total WPL collected in 2021 from the industry could total over RM500 million.

“With current favourable CPO prices still being sustained, this amount is expected to be higher,” they noted.

Plantation Industry and Commodities Minister Datuk Dr Mohd Khairuddin Aman Razali signed a Federal Government Gazette published by the Attorney General’s Chambers on Feb 15, stating that the government would be collecting RM16 in cess payments on per tonne of CPO produced from RM14.

According to the document, the Malaysian Palm Oil Board (Cess) Order 2019 was amended after consulting the Minister of Finance.

The Cess Order, which is stipulated under the Malaysian Palm Oil Board Act 1998 (Act 582), is a fee levied by the government to support the industry.