2013-11-05 [ ][B] Govt likely to cut budget for palm oil sector by 30% or RM900mil next year (means 2014)

source: [thestar online]

Govt likely to cut budget for palm oil sector by 30% or RM900mil next year

BUDGET 2014 has been rather low key on the palm oil sector, but sources say the Government will likely slash the budget for the Plantations Industry and Commodities Ministry by some 30% or almost RM900mil next year.

This move could represent the highest budget cut for any ministry, and palm oil industry players are not too happy with the new development as many are still in the dark over which particular programme and funding of the sector that will be affected next year.

Of particular interest is whether the Government’s National Key Economic Area (NKEA) programmes for palm oil will now take a backseat? This is given the higher spending to develop the five regional economic corridors – the East Coast Economic Region, Northern Corridor Economic Region, Sabah Development Corridor, Sarawak Corridor of Renewable Energy and Iskandar Regional Development Authority.

Does this mean less incentives will be given to the palm oil NKEA eight entry point projects (EPPs)? Five of the EPPs address the country’s upstream productivity and sustainability, while the other three address downstream value addition and sustainability.

With the potential speedbump in the palm oil NKEA EPPs in the form of budget cut, many industry players opine that the Government’s target for palm oil industry to generate an additional RM125bil to gross national income to reach RM178bil by 2020 will not likely materialised.

At this juncture, many are made to understand that the budget for the Palm Oil Industrial Cluster (POIC) projects might also be reduced but the quantum still has not been specified.

So far, several POICs have been set up with the first being POIC Lahat Datu in Sabah, extending to Kuantan and Johor.

Some are also wary about the progress of replanting Malaysia’s aging palm trees profile of over 25 years old.

The ministry’s budget slash might dampen efforts to increase oil palm replanting especially when the country’s palm oil stock is on the rise and would affect the target for the annual palm oil yield to hit 26.2 tonnes per ha in 2020 from 21 tonnes per ha currently.

On hindsight, there is surprisingly a slight increase in Budget 2014 for the national palm oil custodian – Malaysian Palm Oil Board (MPOB).

Many are not sure whether it is from the increase in crude palm oil and crude palm kernel oil production or an increase in the cess and levy to be paid by oil palm plantations to MPOB.

However, on the plus side, many palm oil industry players are in favour of the budget cut by RM500mil to RM1bil in 2014 for cooking oil subsidy scheme (COSS). While the Government will maintain the price of subsidised cooking oil, it is believed that the volume in the market will be reduced from 75,000 tonnes per month.

Oil palm plantation companies, meanwhile, are hoping the Government will do away with the windfall profit tax to support the COSS.

Deputy news editor Hanim Adnan wonders whether the incident of shortage in cooking oil will occur again come festive seasons here given the lower volume produced next year?