KUCHING: Palm oil associations are urging the government to not impose additional and new cess for the purpose of Mechanisation and Automation Research Consortium of Oil Palm (Marcop), in light of the recently gazetted Malaysian Palm Oil Board (Cess) (Amendment) Order 2021.
In a joint statement, they referred to the federal government gazette dated Feb 15 this year that spelt out that the government would be collecting RM16 in cess payments on each tonne of palm product (crude palm oil and crude palm kernel oil) produced, compared to the previous RM14 which came into effect January 2020.
“The oil palm growers were taken by surprise by the move on the part of the Malaysian government to increase yet again the tax burden on the palm oil sector, this time with an additional cess of RM2 per tonne of palm products, both crude palm oil and crude palm kernel oil.”
They said the amendment to the Malaysian Palm Oil Board (Cess) Order 2019 was made after consulting the Minister of Finance Tengku Datuk Seri Zafrul Abdul Aziz and the gazette of the amendment order was approved by the Minister of Plantation Industries and Commodities (MPIC) Datuk Dr Mohd Khairuddin Aman Razali.
“Unfortunately, there were no consultative engagements nor any initiative by the government to pursue inclusive discussions with the growers who are the ultimate cess contributors on the additional cess.”
The associations also stated that both the Malaysian Palm Oil Board (MPOB) and the minister reportedly could not provide detailed information on the intent and purpose of the cess collection.
Moreover, the associations estimated the amended cess order 2021 will add about RM44 million per year to the MPOB cess coffer, based on production that every RM1 cess can equate to about RM22 million per year contribution from the oil palm growers.
With the amendment, they said all the oil palm growers in Malaysia comprised of smallholders to public listed plantations companies, will end up collectively contributing an estimated total cess of about RM344 million per year to MPOB.
Notwithstanding that, the associations noted that there were engagements at the end of 2020 concerning another additional cess which was proposed to be implemented on Jan 1 this year. They said it was understood at the time that the funds collected under that cess were intended to be used for mechanisation and automation in the palm oil industry under a proposed consortium as its platform, to be named the Marcop.
“Marcop would function as a neutral body to manage collaborations that are to be intensified through strategic partnerships with the purpose of addressing oil palm mechanisation, especially in harvesting technology.”
The associations stated the stakeholders acknowledged that strategic partnerships in mechanisation should be the key research and development focus and top priority going forward in order to address the plantation sector’s high labour dependency.
It was also encouraging that the federal government had approved in Budget 2021 a matching grant of RM30 million to the mechanisation initiative, they added.
“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 proposed for an equivalent RM30 million from the gazetted MPOB (Cess) (Amendment) Order 2021 to be channelled as seed-funding to kick-start Marcop – to be combined with the already approved RM30 million matching grant from the Malaysian government as announced in Budget 2021.
“The latter matching grant from government must not be derived from the same pool of MPOB cess funding.” Furthermore, the associations also appealed to the government to channel a slice from its consolidated pool of the windfall profit levy (WPL) collected from oil palm growers for the purpose of sustaining Marcop.
“The MPOB’s former chairperson, Datuk Ahmad Jazlan Yaakub, was reported to have highlighted that the total WPL to be collected in 2021 from the oil palm growers could total over RM500 million. With current favourable CPO prices still being sustained, this amount is expected to be higher.”
The associations opined it would be a good policy and practice for portions of the WPL proceeds to be channelled back to oil palm growers to address the myriad of challenges facing oil palm growers today.
They pointed out the oil palm sector had proven to be one sector that consistently performed positively during the times when the nation’s economy was in need of revival, such as the recession in the 1980s, Asian Financial Crisis in 1997, recession in 2009 and despite the labour shortage amid the present Covid-19 pandemic.
“Thus, the support and re-channelling of cess and levy contributed by oil palm growers by the government investing in the oil palm mechanisation with the advent of Industry 4.0 will help to defend and revive the nation from further unforeseen economic troughs amid the pandemic.”
The joint statement was issued by the Malaysian Palm Oil Association, the Malaysian Estate Owners’ Association, the National Association of Smallholders, the Palm Oil Millers Association, the Sarawak Oil Palm Plantation Owners Association, the Palm Oil Refiners Association of Malaysia, the Malaysian Oleochemical Manufacturers, the Malayan Agricultural Producers Association and The Incorporated Society of Planters.