17/09/2025 (The Edge Malaysia) - THE Malayan Edible Oil Manufacturers’ Association (Meoma) has raised concerns over the government’s cooking oil subsidy framework, saying it is unsustainable because static ceiling prices for bottled refined cooking oil is hurting manufacturers and squeezing margins as they grapple with high production costs, including elevated crude palm oil (CPO) price.

The government, through the Ministry of Domestic Trade and Costs of Living (KPDN), introduced the flexi price ceiling mechanism in July 2023 to replace the Cooking Oil Price Control Mechanism (MKHMM), which had provided subsidies to refineries and packers to keep bottled cooking oil (1kg, 2kg, 3kg and 5kg) affordable at between RM6.90 and RM30.90.

Under the flexi price ceiling mechanism, bottled cooking oil prices were meant to be adjusted monthly based on the average CPO price published by the Malaysian Palm Oil Board (MPOB). In reality, however, the formula was never applied because of a lack of government funding, says Meoma executive secretary Andy Lee.

“What the industry agreed with KPDN was to set a threshold of RM3,890 per tonne of CPO. The threshold is based on the previous month’s average CPO price, calculated by MPOB at the start of each month. For example, going into September, the August average would be the reference. If it comes in at RM4,300, then by the 7th of the following month, the ceiling prices should be adjusted accordingly,” he explains.

If the average CPO price is above the threshold of RM3,890, then the ceiling prices are to be adjusted accordingly and vice versa, if the average CPO price is below the threshold.

“Ceiling prices are supposed to change on a monthly basis. Unfortunately, that got stuck, the ceiling prices got stuck. Even when costs went up, there were no adjustments. It has already been about three years that it has remained the same,” Lee tells The Edge.

“That’s why last year we were fighting very hard. The industry tak boleh tahan (could not stand it) anymore, supply was affected. That is when, during the fasting month this year, KPDN gave some compensation to the industry by allowing us to claim RM600 per tonne — they called it an incentive to the industry — but that lasted only three months.”

There are 30 to 40 companies involved in bottling refined palm cooking oil. The big names include SD Guthrie Bhd (KL:SDG), FGV Holdings Bhd and FFM, a unit of PPB Group Bhd (KL:PPB).

“So, the industry keeps on subsidising it. Our margins were squeezed into [the] nega­tive. The ceiling prices just got stuck. And then we appealed to KPDN, but we were told it needs cabinet approval, as well as that of MoF and KPK (Ministry of Plantation and Commodities). All this takes ages, with the discussions with KPK and the whole process, until we were literally left hanging,” Lee says.

He also points out that under the Cooking Oil Stabilisation Scheme (COSS), the retail price of 1kg of polybag cooking oil has remained at RM2.50 since 2007, when CPO prices were about RM2,000 per tonne.

COSS allocates a monthly quota of 60,000 tonnes to about 350 repackers, with subsidies bridging the gap between market costs and the controlled retail price. As CPO prices have risen, the subsidy bill has surged — hitting RM1.945 billion in 2024 and continuing to climb in line with the market, the association notes.

The RM1.945 billion spent on COSS in 2024 is more than double the RM845.5 million originally budgeted. In 2023, actual spending hit RM1.689 billion compared with a RM500 million allocation.

Bloomberg data shows the CPO third-month futures contract peaking at RM4,672 per tonne on Feb 19 before easing 4.7% to RM4,452 at the time of writing. Prices have remained above RM4,400 since mid-August.

Meanwhile, local-delivered MPOB price stood at RM4,369 on Sept 3, down 11% from the start of the year.

“The price of RM2.50 per 1kg of polybag cooking oil is good for the rakyat but it may not be reaching them, as it promotes leakages and creates opportunities for profiteering,” says Lee.

Meoma has questioned whether the fixed RM2.50 retail price and monthly quota of 60,000 tonnes are still appropriate. The association notes that used cooking oil is often bought back at RM3 per kg whereas subsidised fresh oil is sold at RM2.50 per kg, promoting leakages, with subsidised oil being diverted to non-household uses. “The scheme is not sustainable, as CPO prices are too high. Industry players have proposed narrowing the gap on the ceiling price by staggering the price increase,” says Lee.

On the issue of consumers buying more than the limit of three bags per person, Lee says that while the government has invested significant resources to tackle the issue, the challenge lies not only in enforcement but also in the underlying price disparity.

“For 18 years, the ceiling price of RM2.50 has not been raised, it defies inflation and CPO prices are not going to come down,” he notes.

Meoma, together with 12 other plantation associations, raised the cooking oil subsidy issue late last month, warning that the continuation of current policies could erode industry viability and threaten supply stability.

They urged the government to review ceiling prices for bottled cooking oil in line with market realities; alternatively, it could channel part of the Windfall Profit Levy collections to ease the subsidy burden. 

https://theedgemalaysia.com/node/769786