KUALA LUMPUR: The government will look into the formula of the windfall tax imposed on the plantation industry following proposals by planters and palm oil refiners, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said.
“We are looking at a suitable format (on windfall tax),” he told reporters after launching the Second International Palm Oil Trade Fair and Seminar 2008 (POTS 2008) here yesterday.
Planters have requested that the threshold price of crude palm oil (CPO) be raised from RM2,000 to RM2,500 a tonne for the imposition of the windfall tax which was introduced in June.
Chin also said the government would consider proposals to adjust the compensation for cooking oil refiners.
It is understood that the Malayan Edible Oil Manufacturers Association has requested that the cooking oil subsidy be revised to RM2,300 per tonne of refined bleached deodorised (RBD) palm olein, which is used as cooking oil. The cooking oil subsidy is RM1,700 a tonne currently.
However, as palm oil prices continue its decline, the government would be collecting less windfall tax from planters. This would eventually have an effect on the retail price of cooking oil, as the windfall levy would not be sufficient to pay the cooking oil manufacturers.
The subsidy for cooking oil would have to be reduced in order to pay the manufacturers. Chin, however did not comment whether the price of cooking oil would increase.
Meanwhile, Chin said the country’s oil palm growers would have to consider expanding beyond Malaysia as land for oil palm cultivation had become scarce.
“Malaysia would probably exhaust the available area for oil palm plantations, which is now less than six million hectares, with a annual production capacity of up to 25 million tonnes of oil. There is hardly any land left for oil palm plantations in the peninsula,” he said.
Chin also said planters should expand to Africa and South America. Out of the 6.6 million hectares of land available for oil palm, plantation companies had already used about 4.4 million hectares, he said.
“With Malaysia being a major producer of palm oil, it is difficult to say how much land is needed, but we are encouraging planters to go abroad,” he said.
Palm oil, used as cooking oil and feedstock for biodiesel, soared to a record RM4,486 a tonne in March. The price has since tumbled and the benchmark October contract was trading at RM2,607 a tonne as at 4.30pm on Bursa Malaysia Derivatives yesterday.