02/08/2012 (The Star) - The Ministry of Plantation Industries and Commodities (MPIC) has reassured palm oil industry players that the latest two million tonnes increase in the duty-free crude palm oil (CPO) export quota is only a temporary measure aimed at stock management and ensuring the renumerative prices for local palm oil producers.

MPIC said a comprehensive review was currently undertaken to further enhance the downstream sector of the palm oil industry and also, ensuring the interest of the producers.

“We are of the view that the development of the industry has to factor in the interest of all parties, including the producers and the processors,” the ministry said in a statement yesterday.

It pointed out that MPIC would continue to discuss with all the relevant stakeholders to address the issue of the competitiveness of the palm oil industry in the longer term. “This is to ensure a balanced growth and the interest of all the players in the industry is taken into account.”

The ministry was responding to recent foreign wire and local media reports on the increase of the tax-free CPO export quota by the Government that had bring cheers to the CPO producers, but instead causing discontentment among palm oil refiners. MPIC pointed out that the palm oil downstream sector particularly producers of processed palm oil and packed products had made numerous representations to the ministry regarding the competitiveness of their products vis-vis with those produced in Indonesia since September 2011.

This was contributed by the export tax structure in Indonesia which is aimed at promoting downstream operations.

“In view of this, domestic refining capacity utilisation has decreased to 60.8% during the first six months of this year compared with 72.9% in the same period in 2011.

“The ministry is concerned that due to the additional time required to address this issue, the additional window to reduce stocks through the CPO duty free mechanism has to be maintained,” it added.

According to MPIC, the palm oil industry is one of the key areas under the Government Economic Transformation Programme towards acheiving developed economy status by 2020.

In addition, to further promote production of high value added products and not to compete with basic processed products from Indonesia.

The Government provides incentives up to 40% of capital cost for new investment in value added products including surfactants, polyurethane, super olein, tocotrienol, phytonutrients and carotenoids.

For this year, the ministry said CPO production was forecasted at 18.5 million tonnes and the CPO duty free quota of five million tonnes accounting for 27% of total domestic CPO production.

From January to June 2012, the monthly average palm oil stock was 1.895 million tonnes, compared with 1.69 million tonnes for the previous corresponding period. The CPO production from July to December this year is projected to increase by 3% to 10.62 million tonnes compared with 10.32 million tonnes in the same period in 2011.