Malaysia palm oil industry set to be hit by Indonesia’s duty cut, India’s pro-farmers move

With Malaysian palm oil producers facing price pressures, the finance ministry may consider trimming the windfall tax levied on the sector

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A worker harvests palm oil fruits in Johor, Malaysia. Photo: Bloomberg

Published: 3:04pm, 24 Sep 2024Updated: 4:48pm, 24 Sep 2024

Malaysia’s palm oil producers may struggle to book healthy profits over the coming months as a double blow of tax cuts for competing producers in Indonesia and a hike in import levies by key market India is set to squeeze down prices of the commodity.

Indonesia, the world’s largest producer of palm oil, last week revised its levy on palm oil output to a percentage of the commodity’s average monthly price, effectively bringing the duty for crude palm oil (CPO) down to an estimated US$63 per tonne from US$90 for September, according to Bloomberg.

The decision came just days after India, the world’s largest consumer of vegetable oils, imposed a 20 per cent tax on all imported crude and refined vegetable oils to bolster support from farmers who form a crucial bloc in coming elections in two states.

Aware of the price pressure on its palm oil producers, Malaysia’s finance ministry is considering trimming the windfall tax levied on the sector, according to state media on Monday.

That kicks in when palm oil prices exceed 3,000 ringgit (US$718) a tonne in the peninsula and at 3,500 ringgit per tonne in the states of Sabah and Sarawak in Malaysian Borneo.

But until the ministry makes its call, Malaysia’s producers look exposed, industry watchers say.