The Edge Markets (30/11/2020) - KUALA LUMPUR (Nov 30): The Malaysian Estate Owners' Association (MEOA) has appealed for the Malaysian Palm Oil Board (MPOB) Cess Order 2020 to be postposed to a later date from its current Jan 1, 2021 implementation date.

In a statement yesterday, it said that the proposal to levy this additional cess should be open for further dialogue with oil palm growers.

It argued that by postponing the new cess order’s implementation, it would enable to relevant stakeholders to be given an additional opportunity to participate in inclusive engagement with the Ministry of Plantation Industries and Commodities (MPIC) and the MPOB on the new plans.

“It is widely understood from previous engagements with MPOB and from MPOB’s circulars for public comments, that the funds are intended to be used for mechanisation and automation (M&A) in the industry,” the MEOA noted.

The new  MPOB Cess Order 2020 stipulates the payment of an additional RM5 per tonne on of crude palm oil (CPO) and crude palm kernel oil (CPKO) produced, resulting in the total amount per tonne paid rising to RM19 per tonne, from RM14 per tonne currently levied.

The MEOA calculated that for every RM1 per tonne levied on the CPO and CPKO, RM22 million in cess payments would be collected per year. It estimated than an additional RM110 million will be collected when the new order takes place over the one-off plan of one year.

“In earlier stakeholder engagements, there were proposals that the Malaysian government would accord a matching grant to the mechanisation initiative at the ratio of 1:1. This was to be in line with the spirit to promote partnership between the government and private sector.

However, in the recent Budget 2021 announcement, the government revealed that only RM30 million of matching grants has been budgeted to encourage ‘investments’ in M&A. Thus, the matching ratio would work out to be 0.27: 1,” it noted.

At the current RM14 per tonne level, total cess collection is now more than RM300 million per year, most of which is being channelled into R&D and M&A.

“MEOA acknowledges that M&A should be R&D’s key focus and top priority going forward, to address the high labour dependency in the plantation sector. However, the governing agencies must advocate and exercise inclusivity and provide better clarity on how the cess fund will be used for the purposes of M&A.

MEOA said until and unless MPIC and its agency MPOB can provide assurance and accountability to the contributing growers on how the fund will be used and accounted for, it may lead to sending a wrong signal or to the incorrect perception that the contributors are subjected continually to more and more taxation, without any say over how their contributions are spent, and without assurance that their contributions are spent on R & D actually useful to the industry’s requirements and needs.

"In short, a lack of engagement will reinforce the impression amongst growers that hurting ‘the goose that lays the golden egg’ is of little importance to the authority stakeholders,” it said.

The MPOB is currently welcoming public feedback on the proposed Cess Order from Nov 20 to Nov 30 (today). The draft order can be viewed on its website.

Read more at https://www.theedgemarkets.com/article/postpone-mpob-cess-order-2020-meoa-urges