07/12/2011 (Borneo Post) - The tax structure within the oil palm industry is expected to be revised for the upcoming Budget 2012 announce­ment as efforts to further develop the sector intensifies.

In an email response to The Borneo Post, MIDF Research Sdn Bhd’s (MIDF Research) planta­tion analyst, Jasmaliha Jaafar opined that the cost of production was expected to be increased by RM150 per metric tonne (pmt) to RM200pmt.

This was premised on the prices of palm oil seeds that went up by 30 per cent, fertiliser cost that had swelled from RM80pmt to RM100pmt, and labour costs that had increased by RM50pmt to RM60pmt.

“Therefore, in order to help the local planters, we are expecting the government to revise the tax struc­ture especially the windfall tax as this sector has been heavily-taxed in the form of taxes, cess, levy and export duty,” she said.

Additionally, tax rebate along with added incentives would most likely be addressed in tomorrow’s budget.

“In order to compete with the lower export tax for refined palm oil products from Indonesia, the government should consider giv­ing tax rebates for refined palm oil products imported from Malaysia or revise downwards the crude palm oil (CPO) export tax struc­ture,” she pointed out.

Other areas that would be given emphasis during the announce­ment according to her would include the B5 programme.

“We are anticipating the B5 programme to be implemented in more prtrol pump stations nation­wide. This mandatory blending will increase the take-up rate for CPO hence will prevent escalating inventory level.”

To recap, in June this year, the B5 programme was put into practice in Putrajaya whereby the govern­ment had implemented a manda­tory programme on the blending of biofuels with Petroleum Diesel.

The current dilemma facing the downstream segment was the higher CPO price that subse­quently caused higher feedstock prices. The biodiesel application had been postponed a few times previously and was expected to be implemented by November this year within the central region of Malaysia. The only thing that could make this B5 practice successful was through the enforcement from the government.

Moving ahead, in order to achieve the targeted 23 per cent oil extraction rate (OER) by 2020, the government as indicated by Jas­maliha should consider providing credit for purchases of semi-clonal seeds.

Recently, the price of semi-clonal seeds has increased by 45 per cent to RM2.70.

“The higher price would defi­nitely discourage the planters especially the smallholders to use this high yielding palm oil breed for replanting or new planting activities.”

“Therefore, the credit will pro­vide some incentives for the planters to use high quality palm oil seeds and subsequently will increase the national OER,” she pointed out.

Other than that, the only issue expected to rise from the budget was the continuation of last year’s announcement. To reflect back, the government had previously encouraged replanting activity in a bid to increase current produc­tivity rate.

Moreover, the government had also approved RM14 million for subsidising oil palm replanting scheme. The scheme was in the form of seedlings, fertilisers, pes­ticide, weed killers and clearing expenses worth at RM7,000 per hectare.

Kuala Lumpur Kepong Bhd had earlier announced its plan to invest RM706 million in high value downstream activities and this in­cluded setting up new facilities to produce methyl ester sulphonate and fatty alcohol.

The group had also been award­ed a RM134 million grant from Malaysian Palm Oil Board for this particular investment. The government had demonstrated its full interest in supporting the oleo derivative companies and this would most likely be an ongoing focus from the government.

Apart from that, the budget would also highlight the reduction of the number of foreign worker by increasing in stages the levy according to the sector. The levy on foreign workers was raised by RM50 from RM540 per worker last month.