Malaysia weighs palm oil export tax waiver as stocks hit 3.5 million tonnes

Malaysia is considering a temporary waiver of its 10 per cent export tax on crude palm oil to speed up shipments and cut record inventories, according to reports in Malaysian media up to October 27, 2026. Palm oil stocks in the country rose to about 3.5 million tonnes in September, a record, while palm oil from neighbouring Indonesia has been selling at a large discount. Officials of the Ministry of Plantation and Commodities were reported to have met industry executives on October 20 to discuss the idea, but no decision had been announced by October 27, and Malaysia's Budget 2027 did not include a waiver.

Palm oil goes into cooking oil, packaged foods, snacks and soaps, and Indian refiners are regular customers of Malaysian and Indonesian sellers, as recent reports on Indian buying show. So a policy change in Kuala Lumpur can feed through to what Indian refiners pay, and from there to the price of cooking oil and the costs of food companies.

An export tax is a charge a country places on goods leaving it. Malaysia's 10% tax adds to the price foreign buyers pay. Indonesia has its own levies, but its oil has recently been cheaper, so buyers have favoured it and Malaysian tanks have filled up. Removing the tax for a while would let Malaysian exporters cut prices and move stock, which in turn could put downward pressure on world palm oil prices.

There are limits. One analyst, Harald Sippel of ESG Malaysia, argued that even passing the whole waiver to buyers would close only part of the RM700 to RM900 gap with Indonesia, and that it would not give Malaysia lasting competitiveness. Indonesia could also respond by changing its own levy, which would cancel much of Malaysia's advantage. Reports also said Indonesia's levy may ease in November as its monthly reference price falls.

For India, the timing matters. Reports earlier this month said Indian refiners had stepped up palm oil buying to rebuild stocks ahead of the festival season, and one Malaysian report said Indian stocks of sunflower and soybean oil should start falling over the next six to eight weeks, freeing storage for more palm oil.

Short-term: Until Malaysia decides, palm oil prices are likely to move with each report on the waiver, as they did after the budget. Indian importers may wait for clarity before placing large orders for later months.

Long-term: If Malaysia waives the tax and Indonesia does not respond, Indian buyers could shift some purchases back to Malaysia and pay less, which may ease costs for refiners and food companies. If both countries cut charges, global palm oil could become cheaper, which would also affect prices for Indian oilseed farmers growing mustard, soybean and groundnut, whose crops compete with imported oil.

Who is affected: Indian edible oil importers and refiners, food and soap makers, households that buy palm-based cooking oil, Indian oilseed farmers, and Malaysian planters and smallholders.

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