Malaysia surprises by keeping crude palm oil exports tax free

A worker inspecting the quality of palm oil fruits at a factory in Sepang, outside Kuala Lumpur, in November 2014. -- PHOTO: AFP
A worker inspecting the quality of palm oil fruits at a factory in Sepang, outside Kuala Lumpur, in November 2014. -- PHOTO: AFP

KUALA LUMPUR (Reuters) - Malaysia has kept tax on exports of crude palm oil at zero for March, a government circular showed on Monday, extending a duty-free policy held since October.

The move, which is likely to underpin prices, comes as a surprise as Malaysia's plantation industries and commodities minister said last week the country was planning to resume taxing exports from March.

The rate was scrapped from October to December, and later extended to end-February.

Malaysia, the world's second largest palm oil producer after Indonesia, calculated a reference price of RM2,232.88 per tonne for March crude palm oil, effectively incurring an export duty of zero per cent.

Increased global edible oil supplies and slowing demand have pressured palm oil prices which dropped 15 per cent last year.

The authorities in Indonesia and Malaysian, which account for 85 per cent of global palm oil production, are giving financial incentives in a bid to boost demand and support prices of the tropical product.

Indonesia has approved a threefold increase in biodiesel subsidies which is likely to take effect next month.