Enormous Revenue Setback For Sabah’s Oil Palm Sector With New SOPs – MEOA

KUALA LUMPUR: With crude palm oil (CPO) price currently trading around RM3,000 per tonne, Sabah stands to potentially lose RM900 million per month in revenue following the enforcement of new standard operating procedures (SOPs) to curb the COVID-19 pandemic surge.

The Sabah state government recently announced that new SOPs for the oil palm sector in the state would include the restriction to only 50 per cent of its workforce capacity in attendance, and shorter working hours daily from 6 am to 6 pm for its processing supply chain. 

The Malaysian Estate Owners’ Association (MEOA) estimates that if the entire oil palm supply chain in Sabah is constrained in accordance with the new regulations, the state could see CPO production falling by as much as 300,000 tonnes a month, set against the present high crop season.

“At prevailing favourable CPO prices close to RM3,000 per tonne, the estimated loss in revenue can be a staggering RM900 million a month or RM30 million a day and this loss has not factored in palm kernel losses,” losses,” it said in a statement.

It noted that since 2005, the state government has been collecting a 7.5 per cent sales tax on CPO from the oil palm stakeholders and in recent years, average total sales tax collectable from CPO for State coffers could amount to between RM800 million and RM1 billion.

“The new SOPs now in place will henceforth also impact the state’s sales tax revenue and using the above potential loss in revenue of RM900 million per month from CPO, it will also translate to RM68 million loss per month in the collection of Sabah sales tax,” the association said.

It said the potential loss in tax revenue could have gone a long way to help in mitigating the present Covid-19 pandemic in Sabah.

“The oil palm sector is already committed to continue adhering strictly to the present SOPs.

“There is no need for the plantation sector to adhere to the 50 per cent ruling of workforce in attendance when social distancing by law of one metre, the employment ratio is one worker to seven hectares and the distance between each palm is nine metres in oil palm plantation, are all in place”.

MEOA stressed that there is uniqueness in oil palm plantations being isolated and vastly spread out mainly in rural landscapes, and where social-distancing is already the nature of work and norm to its operations.

“We are appealing to the Sabah state government to review and to immediately lift the restrictions of the new SOPs put in place that has included the oil palm sector.

“Failing which, not only there may be no control over the 220,000 plantation workers, the social, economic and political implications may be devastating. The new SOPs would see both the smallholders and mid-sized players in the state’s oil palm sector bearing most of the said losses during this period,” it added.

Malaysian Palm Oil Board 2019 statistics revealed that Sabah’s palm oil mill sector processed 24 million tonnes of fresh fruit bunches derived from smallholders and planters, which produced 5.04 million tonnes of CPO and 1.15 million tonnes of palm kernel.