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Oil Palm Industry Opposes New Tax

by PNG Business News - April 16, 2021

The oil palm industry has opposed the government's directive to levy a high tax on fertiliser, agriculture's most basic input because it will bring the industry out of business.

Robert Nilkare, chairman of the PNG Palm Oil Producers Association and PNG country manager of New Britain Palm Oil Ltd (NBPOL), said the oil palm industry was heavily dependent on fertiliser to preserve soil fertility.

“Without it, production will decline and soil fertility will degrade,” he said.

According to Nilkare, agriculture, which supports a significant number of smallholders and is one of the country's largest industries, would suffer greatly as a result of this.

“This is particularly the case for PNG’s smallholder farmers whose palms are almost universally deficient in nutrients.”

Both regulatory bodies, including the Department of Environment and Climate Change, received financial instruction from the Department of Finance on January 21.

This was to put in place the current fees and charges that the government had authorised in gazette notice G673.

The PNG government has now imposed a fee on all fertiliser imports, especially nitrogen-containing fertilisers, in addition to many other fee rises levied on companies and communities, such as petrol.

“Decades of research has gone into this to find ways to increase fertiliser uptake by smallholders,” Nilkare said.

“This new tax on fertiliser will immediately increase the cost of fertiliser to smallholders, this will reduce their usage and so reduce their production, income and livelihoods.

“This is particularly the case in areas where increasing rural population is creating significant land pressure and so finding ways to improve production from existing farms is paramount.”

Nilkare said that the experts who approached the government with the suggestion and rationale for a tax on nitrogen synthetic fertilizer had not done their homework and hence provided inadequate advice to the climate change and development authority (CCDA).

“The justification is seriously flawed technically, clearly no agricultural expertise was involved, and there was no prior consultation with the agriculture sector,” he said.

“In fact, the CCDA’s own awareness presentations stated that consultation over the synthetic fertiliser levy was with the chamber of mining and petroleum!”

He said that the key reason for the agricultural fertiliser tax was to reduce greenhouse gas (GHG) emissions, but that the CCDA's own analyses had shown that deforestation and habitat destruction were the biggest drivers of GHG emissions.

Just 30% of the estimated tax revenue will go to climate change assistance, according to Nilkare, implying that the proposed tax was for feeding the consolidated revenue.

According to him, the oil palm industry is expected to pay the government K10 million a year from the current fertiliser levy, with smallholders paying K4 million as their share of the fertiliser tax.

“This issue could have been better managed if there had been some consultation with the agriculture sector stakeholders before a tax on agriculture was introduced,” he said.

The imposition of such taxes, according to Nilkare, undermines the government's argument that agriculture is the country's "backbone."

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