SANDAKAN: Tanjong Papat State Assemblyman Alex Thien Ching Qiang said the federal government’s full implementation of the BUDI MADANI Diesel Subsidy Programme on July 1, coupled with the abolition of Sabah’s previous subsidised diesel purchase quotas of 50, 100 and 150 litres, has dealt a significant blow to Sabah’s palm oil industry, leaving many operators ineligible for subsidised diesel and causing a sharp increase in operating costs.
He said that under the previous diesel purchase quota system, although subsidised diesel could only be purchased in limited quantities, transport operators and contractors serving the palm oil industry were still able to obtain subsidised diesel to sustain their daily operations.
“With the quota system now abolished, and many operators no longer qualifying under the new diesel subsidy mechanism, businesses that previously had access to subsidised diesel are now forced to purchase diesel at market prices. Their operating costs have increased substantially almost overnight,” he said.
Alex Thien pointed out that the palm oil industry is the backbone of Sabah’s agricultural sector and one of the state’s most important export industries. It contributes nearly 10 per cent to Sabah’s Gross Domestic Product (GDP), accounts for more than 65 per cent of the state’s total agricultural output, supports hundreds of thousands of jobs, and drives related sectors including transportation, processing, manufacturing, logistics and exports, making it a critical pillar of Sabah’s economy.
He stressed that the palm oil industry is also among the sectors bearing the highest tax and statutory levy burdens in Malaysia. Besides corporate income tax, industry players are required to pay the Windfall Profit Levy, Sabah Sales Tax, and Oil Palm Development Cess, as well as various statutory levies and regulatory compliance costs, contributing significantly to the nation’s economy.
Yet, those who genuinely depend on diesel to sustain production are now unable to receive the diesel subsidy they rightfully deserve, highlighting a clear disconnect between policy implementation and industry realities.
He said every stage of the palm oil supply chain, from harvesting and transporting Fresh Fruit Bunches (FFB) to processing and export, is heavily dependent on diesel. Whether it involves heavy machinery in plantations, transport vehicles, or contractors hauling FFB, substantial amounts of diesel are consumed daily to keep operations running.
“It is deeply regrettable that these operators are not eligible to apply under the Subsidised Diesel Control System (SKDS). With the previous subsidised diesel purchase mechanism now abolished and the new BUDI MADANI Diesel Subsidy Programme excluding them, the industry has effectively lost access to any form of diesel subsidy, placing enormous pressure on its survival.”
He said many industry players had informed him that trucks commonly used to transport Fresh Fruit Bunches (FFB), including rigid dumpers and rigid tippers, are not clearly listed under the categories of vehicles eligible for the Subsidised Diesel Control System (SKDS), preventing them from applying for subsidised diesel.
“These businesses operate legally and fulfil their tax obligations. Why should they now be excluded from the subsidy system and forced to shoulder significantly higher operating costs?” he asked.
Alex Thien said Sabah’s vast geographical landscape means that most oil palm plantations are located in remote areas, resulting in longer transportation distances and logistics costs that are already considerably higher than those in Peninsular Malaysia. The further increase in diesel costs will not only affect plantation owners, contractors and transport operators but will also impact palm oil mills and weaken the overall competitiveness of Sabah’s palm oil industry.
“The government cannot simply abolish the diesel purchase quota system without ensuring that industries genuinely dependent on diesel for production continue to receive reasonable support. Policies that fail to reflect industry realities will ultimately affect not only businesses but also Sabah’s economy as a whole.”
He therefore urged the federal government to immediately review the eligibility criteria and qualifying vehicle categories under the Subsidised Diesel Control System (SKDS) by including Fresh Fruit Bunch (FFB) transport vehicles and other plantation operational vehicles commonly used in Sabah’s palm oil industry.
He also called for the application process to be simplified and for meaningful engagement with industry stakeholders to ensure that a policy intended to ease the people’s burden does not instead impose greater financial pressure on Sabah’s palm oil sector and ultimately pass higher costs on to consumers.
“Diesel is not a luxury. It is a fundamental production cost essential to the survival of Sabah’s palm oil industry. If the government continues to ignore the realities on the ground, it will only undermine Sabah’s economic competitiveness. In the end, it is the people who will bear the consequences,” he added.
