KUALA LUMPUR (Oct 13): The Malaysian Palm Oil Association (MPOA) has expressed disappointment that its "carefully outlined" wish list for Budget 2024 did not make it into the government’s budgetary priorities.

In a statement, MPOA chief executive Joseph Tek Choon Yee said the association's unanswered budgetary pleas underscore growing concerns that the industry’s substantial contributions to Malaysia’s economy may not have received “requisite attention and support” for 2024.

According to the association, its wish list included a call for a comprehensive review of the windfall profit levy (WPL) levied on the commodity sector since 1999, specifically aimed at alleviating the disproportionate burden on oil palm growers in Sabah and Sarawak.

“The association also emphasised the pressing need for a significant footprint of accelerated or intensified replanting of ageing oil palm trees, and advocated for tax incentives to support this endeavour.

“The key pleas are the footprint size and acceleration speed for replanting,” reiterated Tek in the statement.

The MPOA also proposed boosting plantation mechanisation, reviewing the multi-tier levy mechanism, and fostering a partnership with the government to address the sector’s role in the national energy transition, and its commitment to climate change, environmental, social and governance (ESG) compliance and traceability.

Under Budget 2024, the government is setting aside RM100 million as replanting incentives, to avoid old-age oil palms from reaching 560,000 hectares by 2027. The incentive is, however, will be offered as grants and loans to the 7,000 private smallholders.

Responding to this, Tek said that the incentive is anticipated to only address a miniscule fraction of the critical replanting needs of the nation.

“The allocation of RM100 million assistance specifically for 7,000 independent oil palm smallholders would only translate into replanting of between 5,000 and 6,000 hectares of the oil palm hectarage,” he said.

Tek argued that the allocation will only meet the imperative to replant of a low replanting footprint of 0.9% of old trees, as there would be 560,000 hectares of plantations with 25-year-old trees and older in three years’ time.

He said that MPOA had earlier urged the government to provide replanting tax support to the private sector, which he argued will help stimulate an accelerated and larger footprint of replanting across the industry.

This mechanism would include replanting of oil palms under the present reinvestment allowance (RA), allowing the utilisation of the RA against a company’s future statutory income, thereby encouraging greater investment by the private sector, he said.

“In essence, the funding for replanting would have been sourced from the private sector, although it would translate into reduced tax revenue in the short term, but with the prospect of significantly higher tax returns in the future due to increased productivity,” said Tek.

On the call to review the WPL on the palm oil sector, which was not heeded by the government for Budget 2024, Tek noted that it is a burden on the palm oil sector, which operates as a “price taker and not a price maker”.

According to the MPOA, it has also previously urged the government to acknowledge that the state sales taxes incurred in Sabah and Sarawak disproportionately burden the oil palm growers there as compared to their Peninsular Malaysian counterparts.

Therefore, the association urged the government to revert the WPL back to the original 1.5% for oil palm growers in Sabah and Sarawak, from the current 3.0%.

“In addition, in view of the increased cost of production, the MPOA also had beseeched the government for a revision of the WPL price threshold by RM500 per metric ton of CPO from RM3,000 to RM3,500 per metric ton for Peninsular Malaysian growers, and from RM3,500 to RM4,000 per metric ton of CPO for Sabah and Sarawak growers,” he said.

The MPOA represents over 40% of the total planted oil palm area in Malaysia. Its members include major plantation companies such as Sime Darby Plantation Bhd, FGV Holdings Bhd, Kuala Lumpur Kepong Bhd, IOI Corp Bhd and Sarawak Oil Palms Bhd.

Go here for our comprehensive Budget 2024 coverage.