Malaysia to lower export duty on crude palm oil

Malaysia has decided to reduce export duty on crude palm oil from January 1, to boost shipments and bring its products at a par with rival Indonesia.

Malaysia, the second largest palm oil producer, also expects a pick-up in exports to India on rising demand, said Yusuf Basiron, Chief Executive Officer of Malaysian Palm Oil Council (MPOC).

The country exported about 1.9 million tonnes (mt) to India till end-September this year, registering a 58 per cent year-on-year growth.

Last year, Malaysian palm oil exports to India stood at 1.66 mt, accounting for about 21 per cent of India’s imports. Indonesia accounted for the remaining 81 per cent of a total of 8.1 mt imported into India in 2011.

With the proposed reduction in duty from the current 23 per cent to around eight per cent, effective early next year, Malaysia hopes to get back its market share in countries such as India.

“We were a big player in India before Indonesia became big. Indian buyers preferred to buy from Indonesia because of lower prices,” Basiron told a group of visiting Indian journalists on a trip sponsored by MPOC.

He said that the demand from countries such as India and China continues to rise on growing consumption. India, currently, is the third largest market for Malaysia, after China and Pakistan.

The proposed duty cut, approved by the Malaysian Cabinet on Friday, will not only make the country’s palm oil exports more competitive, but would also help check the decline in prices. The Malaysian Cabinet has also decided to abolish duty-free export quotas from January 1.

Crude palm oil prices had declined by about a third over past 11 months, since Indonesia dropped its export duties from 23 per cent to 10 per cent.

Accusing Indonesia of undercutting prices, Basiron said such a low duty structure was not sustainable. The drop in CPO prices has led to value erosion of close to 20 billion Malaysian ringitt or around $7.5 billion, he told a Palm Oil Trade Awareness Seminar organised by MPOC.

Besides, it has also led to an inventory build-up of around 2.48 million tonnes in Malaysia as of end September, a growth of 17 per cent over August.

> vishwanath.kulkarni@thehindu.co.in