THE Malaysia's government is considering a request by domestic palm oil producers, including Sime Darby Bhd and Kuala Lumpur Kepong Bhd, to scrap a windfall tax after the price of the commodity slumped. “I have handed over the proposal to the government through the ministry of finance for further consideration,” Minister of Plantation Industries and Commodities Peter Chin told reporters today.
He didn’t say when a decision might be made. The tax was introduced last July when the price of palm oil was almost double the current level. Profit at growers such as IOI Corp has fallen from records after fertiliser costs soared and the edible oil slumped as the global recession deepened. The tax was applied to planters when they sold palm oil for more than RM2,000 (US$560) a metric ton, and at a time when the vegetable oil fetched RM3,575 on the Malaysian market. Palm oil for April delivery now sells for RM1,860. A request by producers for a refund on tax that’s already been paid isn’t fair, Chin said in Putrajaya, the government’s administrative home outside Kuala Lumpur.
The government plans to swap palm oil worth US$60 million for fertilisers from North Korea to help growers at home cut costs, he said. The government is also seeking to swap the edible oil for fertilisers from Iran, Syria, Morocco, Jordan, Cambodia and Vietnam, he added.
Malaysian palm oil producers last year asked the government to cut the price of fertiliser, about half a grower’s production costs, after the price of the chemical doubled. Most of the fertiliser used by Malaysian palm oil producers comes from Canada and Russia, Chin said. Palm oil is used mostly in cooking and as an ingredient in soaps, and the world’s largest buyers are India and China. The oil can also be added to diesel to make a biofuel. - Bloomberg
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