KUALA LUMPUR (Oct 2): The Ministry of Plantation and Commodities has submitted bids to secure financial resources to support replanting activities, especially on assisting smallholders in the palm oil industry, said Datuk Seri Fadillah Yusof. 

At the Malaysian Palm Oil Association's (MPOA) National Palm Oil Conference (NPOC23), Fadillah, who is also the deputy prime minister, told reporters that the approval is subject to the Ministry of Finance's (MOF) approval.

“We have to wait for the announcement of Budget 2024 [next week]. What we have done is that we have bid [for] certain funds for replanting, particularly for smallholders”. 

“The cost of doing business, not only for palm oil but also for agricultural commodities, is increasing. We need to look at how we can help and support to ensure the palm oil industry is sustainable and competitive,” added Fadillah. 

In a move to improve palm oil productivity, the MPOA has appealed to the government for replanting tax support to be accorded to the private sector to entice larger footprints of accelerated replanting. 

The council also called on the government to expand the scope of the reinvestment tax allowance (RA) to to specifically include replanting of oil palm and to allow utilisation of RA against the companies’ statutory income. 

According to the Malaysian Palm Oil Board (MPOB), the private sector, including state agencies, has a total of more than 500,000 hectares (ha) that are 25 years old and older.

Currently, the cost of replanting can vary from RM20,000 to RM30,000 per ha depending on the terrain and the process. Assuming the cost of replanting at RM20,000 per hectare, it will cost the private sector over RM10 billion to replant old trees.

Last month, ISTA Mielke GmbH (Oil World) executive director Thomas Mielke warned of the consequences of an alarming decline in average yields due to slow replanting due to challenges such as a lack of replantings in recent years, with an estimated 30% of oil palms in Malaysia being 19 years old or older, a slowdown in new plantings that limits production growth, a shortage of skilled labour and management issues.

Mielke also pointed out that the annual average growth in palm oil production is likely to slow to only 1.8 million tonnes or probably less in the 10 years to 2030. This compares with the average annual growth of 2.9 million tonnes in the 10 years to 2020.