Palm | Kelapa Sawit

My colleague Vasantha Ganesan reports on cooking oil subsidy.

KUALA LUMPUR: Will the cooking oil subsidy be the next to go after the end of the bread subsidy? The government is reviewing the subsidy, which costs the government about RM1 billion annually.

Beginning this year, the government removed the subsidy on white bread, saving RM89 million in hand.

The secretary-general of the Ministry of Domestic Trade, Cooperatives and Consumerism, Datuk Mohd Zain Mohd Dom, said the ministry has started talks with the Ministry of Plantation Industries and Commodities on the matter.

"Our ministry started discussions with the Ministry of Plantation Industries and Commodities late last year to study the future of subsidy for cooking oil," Zain told the New Straits Times.

The price of cooking oil depends on the international price of palm oil. The average price of palm oil last year at RM2,300 per tonne was lower than in 2008 at RM2,800 per tonne. But this year, the average price is expected to increase to around RM2,600 per tonne. Zain, however, did not say if rising international palm oil prices meant the government would altogether remove the subsidy for cooking oil or reduce the quantum of subsidy.

For the first 11 months of last year, the government subsidy of cooking oil was RM900 million. Based on data from the ministry for the June-December 2007 period, the subsidy was RM398.74 million while in 2008, the government spent RM1.18 billion in cooking oil subsidy.

The government has been forking out subsidies for essential items like petrol/diesel, liquefied petroleum gas (LPG), general purpose flour, cooking oil and the Super Tempatan series of 5 to 20 per cent of broken rice.

The government started to subsidise sugar last year and it cost RM720 million. Rising international raw sugar pricing had forced the government to reduce subsidy. Since January 1 2010, sugar retail price went up 20 sen per kg. At this price, the government is estimated to spend RM1.008 billion in sugar subsidy this year. Had it not increased the price of sugar, the government would have to pay RM1.26 billion.

It is understood that the RM89 million saved from the removal of white bread subsidy would be channelled to subsidise sugar.