The Hindu Business Line : Malaysia blasts India for higher duty

THE Malaysian Government has set a target for the palm oil industry to produce at least eight tonnes of oil per hectare by producing 35 tonnes of fresh fruit bunches per hectare per year with an oil extraction rate of 25 per cent, Dr Lim Keng Yaik, the Malaysian Minister for Primary Industries, has said.

He was delivering the keynote address at the inaugural session of the Palm and Lauric Oils Conference and Exhibition - Price Outlook for 2003-04 here on Tuesday.

Dr Lim stated this in the context of the fact that over the years, palm oil's competitiveness has been eroded significantly because of improving cost in competing oils, especially genetically-modified soyabeans, and the need to improve productivity per unit area and reduce cost through replanting, rather than open up new areas and expand into marginal lands.

Malaysia's replanting programme has already resulted in a slowdown in output. Growers covering 173,000 hectares have already taken advantage of the incentive scheme of 1,000 Malaysian ringgit per hectare as a result of which output has been reduced by nearly 618,000 tonnes in 2002.

According to Dr Lim, the world oils and fats supplies are now coming to a better balance with demand, after recording high production past three years.

"When demand stagnates, there should be production or supply rationalisation," he emphasised.

Coming down heavily on renewed campaign against palm oil, this time by environmentalists, especially in Europe, who said oil palm area expansion was affecting environment, the Minister said Malaysia employed sustainable production methods and that forest cover in the country was as high as 58 per cent. He also dismissed doubts expressed over food safety aspects of palm oil.

Dr Lim did not spare India and was critical of the high tariff regime.

Threatening to withdraw the exemption given to crude palm oil export from export tax, the Minister said, "India has been a beneficiary of our duty-free export of crude palm oil since 1999; but now, we will have to limit such export and allow it only after meeting our internal refining requirement."

He advised Indonesia, the other major exporter, to fall in line with Malaysia.

According to the Minister, the huge duty differential between crude and refined oils in India was intended to benefit the vanaspati industry, but the duty regime was now encouraging multi-national corporations to set up refineries in India.

Malaysia is exploring other avenues to utilise palm oil, mainly by using it as bio-fuel. Refined palmolein can be blended with diesel and used as auto fuel; and if crude oil and diesel prices increased on war concerns, it would benefit refined palmolein, he observed.

"If crude palm oil prices fall below 700 Malaysian ringgit, we will burn the oil; that is the first safety net," he thundered.

Later at the press conference, Dr Lim continued his India-bashing. He wanted the Indian Government to reduce the duty differential between soyabean oil (45 per cent and crude palm oil (65 per cent), as well as between crude palm oil and refined palmolein (92 per cent).

Stating that Indonesia's role in crude palm oil exports was unacceptable to Malaysia, the Minister said both supplier countries must work together.

The Minister refused to place a time limit by which export-duty on crude palm oil would be re-imposed.

To a query by Business Line about ways to correct the adverse trade balance of India with Malaysia, the Minister sarcastically remarked, "Let India sell more; we do not block imports with high tariffs."

Earlier, Mr Abdul Jabbar Abdul Majid, Executive Chairman of Malaysian Derivatives Exchange in his welcome speech said the meeting was taking place amid uncertainties relating to war and that participation of 1,200 delegates from 31countries was proof of the importance of Palm Oil Price Outlook conference.

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