26/08/2008 (Forbes), Kuala Lumpur - Malaysia's oil palm industry is urging the government to abolish the scheme that requires industry players to subsidize the price of cooking oil, which has put a dent in their margins, the New Straits Times reported Thursday.

The price of cooking oil is capped at 2.50 ringgit per kilogram, which is significantly lower than the global price.

The government implemented the cooking oil subsidy scheme last June in a bid to help the cooking oil industry to cope with surging crude palm oil (CPO) prices, which have scaled new highs in tandem with other edible oils.

A monthly levy is imposed on growers with plantations of more than 40 hectares when the CPO price is above 1,500 ringgit per ton. For every additional 100 ringgit that a ton of CPO fetches, growers must pay a levy of 2 ringgit.

Boon Weng Siew, president of the Malaysian Estate Owners' Association, said the current CPO price of 3,500 ringgit per ton means industry players are paying a levy of 40 ringgit per ton per month.

'The cooking oil subsidy scheme will end in June and we hope the government will do away with it and float the price in tandem with the global market,' the New Straits Times quoted Boon as saying.

CPO prices have scaled new heights in recent months, in tandem with other key vegetable oils, because of demand from the biofuel industry. CPO futures reached to an all-time high of 4,486 ringgit on March 4.

Earlier this month, Shahrir Abdul Ahmad, the newly appointed domestic trade minister, described the price control system, which is designed to suppress the cost of basic goods, as 'a joke', hinting at a sweeping review of the expensive array of subsidies and price controls.
-Thomson Financial-