(Article updated @21:07)
KUALA LUMPUR (Nov 30): The Malaysian Estate Owners' Association (MEOA) has appealed for the Malaysian Palm Oil Board (MPOB) Cess Order 2020 to be postposed to a later date, from its current Jan 1, 2021 implementation date.
In a statement, MEOA said the proposal to levy this additional cess should be open for further dialogue with oil palm growers first.
A deferment of the implementation, it said, would give relevant stakeholders an additional opportunity to participate in inclusive engagement with the Ministry of Plantation Industries and Commodities and MPOB over the proposal.
“It is widely understood from previous engagements with the MPOB, and from the MPOB’s circulars for public comments, that the funds are intended to be used for mechanisation and automation in the industry,” MEOA noted.
The new cess order stipulates the payment of an additional RM5 per tonne for crude palm oil (CPO) and crude palm kernel oil (CPKO) produced, raising the amount to be paid to RM19 per tonne, from RM14 currently.
MEOA calculated that for every RM1 per tonne levied on CPO and CPKO, RM22 million in cess payments would be collected per year. It estimated that an additional RM110 million will be collected when the new order takes place over the one-off plan of one year.
“In earlier stakeholder engagements, there were proposals that the Malaysian government would accord a matching grant to the mechanisation initiative at the ratio of 1:1. This was [meant] to be in line with the spirit to promote partnership between the government and private sector.
“However, in the recent Budget 2021 announcement, the government revealed that only RM30 million of matching grants had been budgeted to encourage ‘investments’ in M&A (mergers and acquisitions). Thus, the matching ratio would work out to be 0.27:1,” it noted.
At the current level of RM14 per tonne, total cess collection is now more than RM300 million per year, most of which is being channelled into research and development (R&D) and M&A.
“The MEOA acknowledges that M&A should be R&D’s key focus and top priority going forward, to address the high labour dependency in the plantation sector. However, the governing agencies must advocate and exercise inclusivity, and provide better clarity of how the cess funds will be used for the purposes of M&A.
“The MEOA said until and unless the MPIC and its agency MPOB can provide assurance and accountability to the contributing growers over how the funds will be used and accounted for, it may lead to sending a wrong signal or cause an incorrect perception that the contributors are subjected continually to more and more taxation, without any say over how their contributions are spent, and without assurance that their contributions are spent on R&D actually useful to the industry’s requirements and needs.
"In short, a lack of engagement will reinforce the impression among growers that hurting 'the goose that lays the golden egg' is of little importance to the authority stakeholders,” it said.
The MPOB is welcoming public feedback on the Cess Order from Nov 20 to 30 (today). The draft order can be viewed on its website.
Refiners voice opposition to proposed hike
Meanwhile, the Palm Oil Refiners Association of Malaysia (PORAM) has also voiced its opposition to the proposal.
“There is already a current rate of RM14 per tonne imposed. If implemented, making a total of RM19 per tonne, albeit for only a year, it will have far reaching consequences resulting in Malaysian refined palm oil products being rendered uncompetitive in the international market, as the additional cost in cess collection will be passed on to the refining industry.
"In addition, the palm oil industry has already been saddled over the years by a high corporate tax, windfall tax and sales tax imposed by the respective state governments of Sabah and Sarawak.
"As it is, we are already losing market share in refined palm oil products to Indonesia, due to their favourable export duty structure. We fear the proposed additional increase in cess will further compound the problem,” PORAM said.