Management Of Cooking Oil Stabilisation Scheme

Management Of Cooking Oil Stabilisation Scheme

a. The Cooking Oil Stabilisation Scheme (COSS) was implemented by the Ministry of Plantation Industries and Commodities (MPIC) due to higher crude palm oil prices in the second quarter of 2006 and early 2007. This resulted in an increase in local cooking oil price, burdens the refinery and affecting domestic consumption. MPIC regulates COSS through the Palm Oil and Sago Industry Development Division [Bahagian Kemajuan Industri Sawit Dan Sago (BISS)]. Among BISS functions is to monitor and implement programmes for the stabilisation of palm oil prices. The Malaysian Palm Oil Board (MPOB), an agency under MPIC is responsible in enhancing the well-being of the Malaysian oil palm industry through research, development and excellent services. COSS is a funding scheme to subsidise refinery at a monthly basis. The subsidy was calculated based on the difference in threshold price of RM1,700 per metric tons with the average price of crude palm oil published by MPOB, with limit to the cooking oil packaging quota approved by MPIC. As at April 2016, MPIC has approved monthly cooking oil quota amounting to 82,169 metric tons for 25 refineries and 241 packaging companies. The total subsidy paid for the period from 2013 to April 2016 was RM2.388 billion.

b. Audit conducted between April to July 2016 revealed that the verification process use in ensuring the fairness and accuracy of subsidy claims by refinery was in proper manner and satisfactory. However, there were some weaknesses in the management of COSS that should be improved as follows:

i. COSS‟s quota set by 2.5kg per capita consumption was high and not supported by the study of actual needs of Malaysians;

ii. 5 (31.3%) out of 16 companies with an approved quota of more than 500 metric tons per month were having lower paid-up capital compared to the limit set by MPIC. One (20%) of those 5 companies was ineligible to be considered for the distribution of quotas due to its paid-up capital condition;

iii. 7 quota holders were given permission to appoint a third party to carry out packaging activities of cooking oil (toll-pack) even though it was not in compliance with the Standard Operating Procedures;

iv. temporary packaging quota were given to 10 refineries and 8 packaging companies without complying to the Standard Operating Procedures and it was prolonged between 9 to 12 months; and v. as at April 2016, temporary packaging quota approval has resulted in excess maximum quota limit between 64 to 464 metric tons per month. 22 Hence, there were increase in Government‟s subsidy expenditure estimated to RM2.92 million.