The commodities ministry of Malaysia, the world’s second largest palm oil producer, has proposed cutting the export tax on palm oil by almost 50 percent in an effort to fulfil a global edible oil shortage. The effort is also seen as an attempt to grow its market share.
Zuraida Kamaruddin, the Plantation Industries and Commodities Minister, mentioned in an interview that her ministry has sent a proposal for the rate cut to the finance ministry, which has in turn set up a committee to review the details.
Depending on the findings of the committee, Malaysia could potentially cut the tax to 4 to 6 percent from the current 8 percent, said the minister. She also said that a decision on the issue could be made as early as June this year. The tax cut would, in all probability, be a temporary measure.
After Russia’s invasion of Ukraine caused a disruption in supply of sunflower oil, and Indonesia’s ban on palm oil exports tightened global supplies, Malaysia’s proposal to cut the tax rate is being seen as an effort to boost its market share of the edible oil market.
Kamaruddin stated that in a time of crisis, Malaysia was willing to relax the rate in order to increase the quantity of palm oil that is exported.
The proposal to the Finance Ministry requested to expedite the tax cut for Malaysia’s largest palm oil producer – FGV Holdings, and companies with overseas oleochemical production.
Malaysia to slow down implementation of biodiesel mandate
In a statement, the Minister also said that Malaysia will also slow down the implementation of its B30 biodiesel mandate (which requires a portion of the country’s biodiesel to be mixed with 30 percent palm oil), in a bid to prioritize supplies to global and domestic food industries.
Palm oil – used in everything from cakes to detergent – accounts for nearly 60% of global vegetable oil shipments and the absence of top producer Indonesia has sent the market in turmoil.
The benchmark palm oil contract fell as much as 2.3% in the morning session on Tuesday, paring some losses after the ministry announced a possible cut to the export tax.
Kamaruddin told reporters that importing countries have asked Malaysia to reduce its export taxes.
Crude palm oil futures have surged about 35% so far this year to all-time highs, further worsening the global food inflation crisis.
Food prices, which hit a record high in March this year, are at risk of rising by almost 20 percent as a result of the Russia – Ukraine war, warned the Food and Agriculture Organization. It has warned that this could also raise the risk of malnutrition globally.
Zuraida said countries like India, Iran and Bangladesh have proposed to barter agriculture products like rice, wheat, fruits and potatoes for Malaysian palm oil.
Malaysia’s production and exports of palm oil are expected to rise 30% by the end of this year, the minister said in a separate statement on Tuesday.
