CPO windfall tax review, bigger funds for replanting under 2025 Budget consideration

PUTRAJAYA: A review of the windfall tax on palm oil and allocation of larger funds for replanting palm oil for smallholders are among the issues proposed for consideration in 2025 Budget, said Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani.

Palm oil industry players had requested the government to conduct a detailed review of the implementation of the windfall tax, which is seen as unsuitable due to rising costs, Johari added.

He said previously, the cost of producing one tonne of palm oil was about RM1,800, but it has now increased to an average of between RM2,800 and RM3,000 per tonne.

Johari explained that the windfall tax is imposed when the price of palm oil reaches RM3,500 per tonne, which results in a narrow profit margin, necessitating a review of the tax.

"To encourage more industry players to continue investing in this industry, we need to look at the structure of the windfall tax.

"I've presented this to the Ministry of Finance (MoF) two weeks ago, and we will wait for their consideration," he told the reporters after the Malaysia Palm Oil Industry Awards 2023/2024 here today.

Johari also said a larger replanting fund for smallholders is necessary to assist them in replanting palm oil, as nearly 1.5 million hectares of palm oil plantations in the country are managed by smallholders.

In the 2024 Budget, the government allocated RM100 million for the Smallholder Palm Oil Replanting Financing Incentive Scheme (TSPKS 2.0), which is distributed by Agrobank and is based on a combination of 50 per cent grants and 50 per cent loans.

He said the amount needs to be increased as replanting palm oil is crucial for enhancing the country's palm oil production.

"There are many more smallholders who need that funding for replanting palm oil to ensure that our exports in the future are not affected," he noted.

Meanwhile, the Malaysian Palm Oil Board (MPOB) chairman Datuk Mohammad Helmy Othman Basha said the performance of palm oil production recorded an increase of 10.2 per cent to 12.6 million tonnes as of August compared to the same period in 2023.

He said during the same period, the export value of palm oil products increased by 12.6 per cent to RM69 billion.

"With stable palm oil income returns, palm oil cultivation has become the choice for plantation owners and smallholders, now covering an area of 5.6 million hectares. Almost half of the palm oil cultivation area, which is 2.5 million hectares, is in Peninsular Malaysia, while 1.49 million hectares are in Sabah and 1.62 million hectares in Sarawak," he added.

Mohammad Helmy said the palm oil industry's contribution to the economy involves a production chain that begins with seedlings and fresh fruit, followed by processing, and ends with value-added products that are exported worldwide.

This chain requires cooperation and commitment from everyone involved to ensure high-quality palm oil and maintain a strong reputation for Malaysian palm oil, he added.