KUALA LUMPUR (May 25): The National Energy Council (MTEN) has agreed to strengthen logistics for the agri-commodity sector, including enabling individual traders to register as companies to qualify for incentives under the Subsidised Diesel Control System (SKDS) as cost pressures mount amid the ongoing Iran war.
The move, to be implemented via collaboration between the Ministry of Plantation and Commodities (KPK) and the Ministry of Domestic Trade and Cost of Living (KPDN), aims to ease rising operational costs across the sector, Economy Minister Akmal Nasrullah Mohd Nasir said during a global supply crisis briefing streamed live on Monday.
The SKDS reflects the government’s shift to targeted subsidies, channelled directly to eligible sectors to help contain the cost of essential goods and services. Under SKDS 2.0, implemented on June 10, 2024, eligible businesses can purchase diesel at RM2.15 per litre, subject to quotas and eligibility.
MTEN also agreed for KPK to explore further medium- and long-term measures, including tightening price controls and anti-profiteering enforcement on agricultural inputs, while expanding palm oil exports into new markets.
Akmal said the sector is facing broad-based cost pressures, with shipping costs to West Asia surging 50% to 80% alongside higher war risk premiums. Plantation operating costs have risen 10% to 30%, while rubber replanting costs have jumped up to 55%.
Processing costs are also climbing, with palm-based oleochemical production up by as much as 30%, while fertiliser and pesticide prices have surged up to 45.5% and 37.5%, respectively.
The agri-commodity sector remains a key export pillar, supporting smallholders as well as plantation, processing and downstream activities, said the minister.
Total trade stood at RM271.64 billion in 2025, with palm oil contributing 63.5%, or RM124.89 billion, of exports.
However, performance weakened in the first quarter (1Q2026) with trade falling 14.7% to RM47.38 billion as exports declined across all major commodities, including cocoa, rubber, palm oil, pepper and timber.
Exports are now projected to contract 13.48% in 2026 to RM170.2 billion, while imports are expected to ease 3.28% to RM72.47 billion, highlighting the impact of supply chain disruptions and rising costs on competitiveness and smallholder incomes.
To cushion the impact, Akmal said the government has rolled out measures including targeted cash aid under the Budi programme, bulk procurement of fertilisers and pesticides to lower costs, and logistics support such as levy and cess rebates for returned cargo.
It is also promoting organic fertilisers to reduce reliance on costly imports, alongside deploying Soil Nutrient Probe (SNP) technology in cocoa and pepper cultivation, with plans to expand its use to other crops.