The Growth of Palm oil in Malaysia. The rapid growth of Malaysian palm oil industry has played an important role in the Malaysian economy. In 2010, the industry contributed 4.67% of the countrys Gross Domestic Product (GDP) (Department of Statistics, 2010) during the last five years (2006-2010), the total area under oil palm has increase at the rate of 15.8% to reach4.69 million hectares. In 2010, Malaysias export earnings form oil palm products increased by 20.4% to RM 59.77 billion from RM 49.66 billion 2009. Due to the oil palm economic potential and rapid expansion during 1960s, the Malaysian government recognized oil palm as a good complementary crop to rubber in the poverty eradication program. In 1961, the Federal Land Development Authority (FELDA) first introduced 375 hectares of oil palm planted area in order to help in raising the income of the landless farmers. Owing to the decrease in rubber and tin prices, the old rubber estates land has been overtaken by the oil palm estates due to the high yields and profitability of palm oil. In 1996, Malaysia become the worlds leading exporter of palm oil, surpassing Nigeria, the previous top world exporter of this oil.In the late 1970s, the Malaysian government began to encourage a shift from crude palm oil (CPO) exports to that its refined products through taxation and incentive policies. The Malaysianization of three major plantation companies previously run by British, namely, Sime Darby, Guthrie and Harrison, and Cross field (later, Golden hope Plantations) started in the 1980s. At that same time, the Kuala Lumpur Commodity Exchange was established in 1080 as an important instrument on the price setting, hedging, and dissemination of market information to reduce market risk in the palm oil trade. The First Industrial Master Plan (IMP1) was launched in 1986 to support and encourage the pam oil industry to sustain its upstream development. The rational of it is to refining and fractionation was emphasized in the IMP1 in order to increase the palm oil industry efficiency and competitiveness in the global market. It also supported the production of palm oil by allowing the use of rubber replanting grants for planting oil palm. The grants amounted to RM 4,447 per hectare for holdings lee than 4.05 hectares. For holdings larger than 4.05 hectares, the grant is RM 3,459.47 per hectare.

The Malaysian Government plans to boost the palm oil industrys contribution to the economy by raising its output to the gross domestic product (GDP)) to RM 21.9 billion, and RM 69.3 billion of exports earnings, during the 10th Malaysia Plan period (2011-2015). To the end, the Oil Palm Smallholders Replanting and New-Planting Schemes were launched. Both schemes are among the Eight Entry Point Projects (EPP) under the Palm oil National Key Economic Area (NKEA), introduced with the purpose of increasing the productivity and income of smallholders.Under the palm oil NKEA, the contribution of palm oil industry to gross National Income was expected to increase to RM 178 billion, compared to RM 52.7 billion in 2009. The Palm oil NKEA comprises five EPPs for upstream activities, and three EPPs focused on downstream activities.The replanting scheme is to help independent smallholders to replant old and unproductive trees, for planted area size below 40 hectares, Under this Scheme, RM700 per hectare will be provided for land clearing, supply of high quality seedlings, and agricultural input. Besides, smallholders with land size below 2.5 hectares will receive Farm Maintenance Assistance of RM 5000 per month for two years. This is to assist smallholder while waiting for production of fresh fruit bunches.In the case of new plating schemes, application is open to independent smallholders in Peninsular Malaysia with land area of 5 hectares and below, whereas in the case of Sabah and Sarawak, application is open to smallholders with land area of 7 hectares and below. However, assistance under this scheme is limited to 5 hectares.

Export Duty In export, the major policy instrument used to stimulate the downstream sector of the Malaysian palm oil industry has been the fiscal measure of imposing export duty on palm oil exports. Since the 1950s the exports of CPO and PPO have been taxed by the Malaysian government. In the 1950s, palm oil was taxed at a flat rate 5% ad valorem that increased to 7.5% in 1960. In 1972, the tax was then converted to a graduated tax based on a rate of 2.5% for every RM50 per ton increase in the Free On Board (FOB) price of CPO above the threshold price of RM350, up to the price of RM700, where the tax reached 30% ad valorem. In 1978, a surcharge was incorporated into export tax, and starting point in the tax was raised to 30% ad valorem for price higher than the threshold price of RM 400. IN 1980, the tax structure was changed again. The principle of cost-plus was used in determining the export tax payable from the threshold price of RM 500. With this tax structure, the portion of the price above RM 500 is taxed at a rate that increases with price starting at 30% for prices up to RM549, and rising to 45% of the price until it reaches RM 1,000. The next change in the tax structure was made in 1986. The starting point for the payment of the export tax was still RM 500, but the tax rate started at 10% on the next RM 50 aboce the threshold price. The tax rate increased at 15%,20%,and 25%for every increment of RM 50.Thereafter, the tax rate was 30% on amount above RM 700.Currently, the tax structure, which came into effect from May 1 1998 until today, the threshold price was increased into RM650. For the price above RM650, the tax structure is similar to that in 1986. The tax structure under the Customers Act 1967 Customer Duties (Amendment) (No.) 1998 is shown in Table 1-A. The CPO export duty is based on the weekly gazette value and will e effect every Monday. For instance, based on Table 1-A, if CPO gazette value is RM 1,000 per tonne, then export duty is RM 80 per tonne (Table 7-B).

Table 1-A (Export Duty on Crude Palm oil)Gazatted FOB Price Tax Rate (%)

On the First RM 650Nil

Plus on the next RM 50.00 per tonne ad valorem10

Plus on the next RM 50.00 per tonne ad valorem15

Plus on the next RM 50.00 per tonne ad valorem20

Plus on the next RM 50.00 per tonne ad valorem25

Plus on balance 30

Table 1-B, Calculation of Export Duty Based on CPO Gazette Value (RM 1,000/Tonne).RM

At RM650 @ 0%0.00

At RM700.00: Plus RM 50.00 @ 10%5.00

At RM 750.00: Plus RM 50.00 @ 15%7.50

At RM 800.00: Plus RM 50.00 @ 20%10.00

At RM 850.00: Plus RM 50.00 @ 25%12.50

Sub Total35.00

Plus (RM 1,000-RM 850) RM 150 @ 30%45.00

Total Duty Payable80.00

Productionof Palm oilProduction systemThe Malaysian oil palm plantations are mainly based on a private estate management system, government schemes, and independent smallholders. Government schemes involve Federal Land Development Authority (FELDA). Rubber industry Smallholder Development Authority (RISDA),Federal Land Consolidation and Rehabilitation Authority (FELCRA), and state schemes (Table 1-c). This has proved to be successful as it provides better utilization of resources. According to Mohamad (1994), it has been essential in the application of advantage management, planting techniques, and high yielding material throughout most of the plantations and organized smallholders.Table 1-D displays the distribution of palm oil planted area in Malaysia according to production category. Of total planted area of 4,854 thousand hectares in 2010.Government Organization Establishes Authority

FELDA1956Develops settlement schemes on jungle land, provides a comprehensive package of services to settlers on schemes, deals with processing and trade in CPO and palm kernels, and is involved in the production and supply of inputs.These schemes are usually more than 2,000 hectares.The initial development activities of a scheme such as jungle clearing, establishment of the palms, building of houses and basic social amenities is done by contract labour.Fresh Fruit Bunches (FFB) are sold to central oil mill run by a FELDA subsidiary.Provides intensive supervision at all stages.

FELCRA1961Deals with rehabilitation of earlier developed low-cost State Schemes in addition to increasing the basic land resources of existing villages by opening up jungle or unused land.To provide a comprehensive package of advise, inputs, finance, and services to participating smallholders.

RISDA1972Replant rubber as well as oil palm and is finance by rubber replanting grants (Block Plantings).

Source: Moll, 1987.

Import Demand of CPODue the palm oil refining industry development, refined and processed palm oil accounts for almost 90% of the total palm oil exports. The rapidly increasing palm oil refining and fractionation capacity strengthened Malaysias position not only as a leading producer but also as a major marketing player in the international trade of oils and fats. To sustain this position, more CPO is needed to meet the requirement of the processing sector, as its capacity exceeds the local production. To fill this gap, Malaysia imports CPO mainly from Indonesia. Fig 1.3 displays the movements in the import quantities of this commodity. Over the period of 1985-2010 the imports showed high fluctuation with peak amount in 2010.

Fig 1.3. Annual crude palm oil import demand by Malaysia, (1985-2010)(000 tonnes).

Issues and challenge Despite the impressive achievements in Malaysias palm oil industry, it is still facing a number of problems and challenges that will affect Malaysias palm oil industrys market of position as a major global palm oil producer. These hurdles include the following:1. Low productivity due to expansion into marginal areas with unsuitable soils, inadequate use of agronomic inputs required for maintaining yields,(especially during low palm oil prices), and lack of access to best practices. Another factor that affects the yield is low replanting rate, as there is a total 449 thousand hectares of non-productive and low yield plantation areas that require replanting. Out this of amount, 109 thousand hectares belongs to independent smallholders.

2. The problem of limited scope of mechanization and skilled labour shortage in the Malaysia palm oil industry have threatened the Malaysia palm oil productivity. This hurdle will probably make Malaysias palm oil industry fall far behind the global competitors

3. Protectionist measures and trade barriers adopted by importing countries. In the global market, there are many market access to protect their local and fats industries. For instance, the Renewable Energy Directive adopted by European Union, which imposes strict regulation on carbon emissions, is distorting the palm oils commodity price. India, is implementing an import tariff policy on all oils production based on he bound rates in agreement with World Trade Organization (WTO). These bound rates set an agreed maximum tariff level for all WTO members, including Malaysia (Carter et al.,2007) Recently, the parliament of the commonwealth of Australia senate announced the Food Standards Amendment (Truth in Labelling-Palm oil) Bill, which would compel the parties involved in the food industry to list palm oil on the content label of the food products containing it. This non-tariff Barrier can give some negative impacts to the Malaysian palm oil industry such as increasing the costs of labelling as well as decrease of export demand from United States and European market.

4. NGOs campaign against the expansion on palm oil area. The current global anti-palm oil campaign is an-going effort and it roots can be traced to the early 1980s. In the recent decades, the Western NGOs anti-palm oil campaigns highlighting its carbon footprint or raising health concerns have generated an increasing unwarranted negative perception health concerns have generated an increasing unwarranted negative perception of palm oil. Moreover, the American soybean lobby groups are claiming palm oil is an unhealthy product as its saturated fat raises blood cholesterol levels, leading to heart disease. There are also claims of extensive deforestation, greenhouse gas emissions, loss of biodiversity, and wildlife decimation, especially the orang-utans, which are often not credibly supported (Basrion,2011).

5. The Roundtable on Sustainable Palm Oil (RSPO), a certification body whose objective us to promote the growth and use of sustainable palm oil through co-operation within the supply chain and open dialogue with its stakeholders was established in 2004 in response to global market pressure to enhance the sustainability of the palm oil (RSPO 2011). The process for starting certification was completed in August 2008. Malaysian palm oil industry is a founding member of RSPO and has been actively participating in RSPO discussions. The issue of the impact of RSPO raised many arguments. While some parties consider it as a phenomenal success story because it is a market-driven instrument working to use resources responsibly(Chandran,2010), other suspect its credibility (World Rainforest Moment, 2010).

6. The infant biodiesel industry faces some challenges, including uncertainty in oil and feedstock prices, sustainability issues, in addition to second generation and non-food biofuels.

The Way ForwardForward looking, to solve the low productivity problems, the Malaysian palm oil industry primary action is to accelerate the replanting of oil palm and improve the fresh fruit brunch yield. MPOB is playing a key role to ensure the replanting is accelerated. For example, the independent and organized smallholders will not be allowed to preserve palms older than 25 years with yield of less than 10 tonnes per hectare per year for the past 3 years. Additionally, the independent smallholders are required to take an initiative to learn the management and get involved into the MPOB, Malaysia Palm oil Council (MPOC), as well as Malaysian Palm Oil Association (MPOA) activities such as the course of management and maintenance nursery palm organized by MPOB in 2011. Enhancing the mechanization level is also important to reduce the labour shortage problems and directly augment the FFB yield in the Malaysian palm oil industry. Due to the world anti-palm oil campaign and sustainable agriculture issues, the Malaysian palm oil industry urgently need some right track solutions. According to Basiran (2011), the Malaysian palm oil industry needs to develop strong set of certification standards and Fair trade label in order to increase the palm oil products credibility in the international market. However, many currently existing certification schemes reflect the priorities of politically biased and uncast countable NGO groups. For instance, many of the available NGOs sustainability certification schemes lack transparency on the rules and the standards of settings. This often set benchmarks that change randomly and without explanation. Accordingly, the Malaysian palm oil industry has establish the own national best-in-class certification standard schemes to help in communicating and reinforcing best practices. The benchmark of standard certification system in Malaysia must be based on the best international practices, high transparency, accepted and recognized across the world. Additionally, Malaysias palm oil industry needs to take the fair trade label than aims to guarantee good prices for smallholder producers product, protecting them to some degree from ups and downs of global commodity prices. At the same time, the fair trade label also supports the local communities and encourages the oil palm industry to make some positive contributions on the environment and rebuilding of societies. All in all, only fair and more complete certification standard will provided the Malaysian palm oil industry the credit it deserves.

Effect of Pests and Diseases on Oil Palm YieldIntroduction In the cultivation of many crops in agriculture, whether cultivated in large plantations or small farms, pets and diseases prevent normal healthy growth and cause significant reduction of crop yield. Oil palm (Elaeis guineensis Jacq.) originated in tropical Africa and is currently planted in many countries. Indonesia has the largest planted area of 7.825 million ha, and second is 4.853 million ha in Malaysia (Ramesh, 2011). In many oil palm growing areas, oil palm is plagued by many pests and diseases. A definition of pest is animals causing damage or annoyance to man, his animals, crops, or possessions. Hence, pests of oil palm include insects, mites, nematodes, rodents, birds, and other animals. A simple definition of a plant disease is my abnormal condition that damages a plant and reduces its productivity or usefulness to man. Diseases of oil palm affect different parts of the plants, namely roots, stem, fronds, inflorescence, and fresh fruit bunch (FFB). Oil palm diseases can be cause by fungi, bacteria, viruses, phytoplasma, nematodes, and parasitic plants. The damage of pests and diseases affect the growth of seedlings in nursery. In some cases, affected seedlings are killed if a control measure is not applied timely. Similarly, pests and diseases affect the healthy growth of immature planting, prolong the immaturity period, and even kill palms in the field. In mature plantings, pests and disease also retard the healthy growth of palms in the field. In mature plantings, pests and diseases also retard the healthy growth of palms, cause reduction in crop yield(fruit achieved by increasing crop yields. The effective and efficient management of pests and disease are very important to ensure healthy growth of oil palms at all stages and no maximize of crop yield by achieving high oil yield per ha. In Malaysia, management of pests and diseases in oil palm incorporates integrated pest management approaches. The Malaysian palm oil industry emerged strongly in 1960s as a result of planned attempt at agriculture diversification and poverty eradication among the rural populace. Production of palm oil increase rapidly from 91793 tonnes in 1960 to 2.6 million tonnes in 1980. This first phase of development presented an interesting insight into the approaches used to promote the market development for palm oil. The question then was how the rapid increase in supply could be efficiently marketed. During these early periods, Europe was how the only major market for palm oil, and was the main development for palm oil, and was the main export destination. It was up to the European manufactures that have the refineries and processing plants, to re-export the finished products to the Middle East countries and other markets to meet the end-product needs of these countries.

Early Strategies 1960 to 1980 Period Strategic planning was used to look at ways on how to create market opportunities to accommodate the increase in palm oil supply expected from massive investment in oil palm cultivation in the 1960 to 1980 period. The production increase was partly contributed by the Federal Land Development Authority (FELDA) which rapidly became the countrys largest palm oil producer during this period. The first step was abolish the inefficient pooling marketing system in operation at that time. It was well known how the pooling system of marketing was favouring the buyers in European was dismantled by the Malaysian producers who were not directly linked to the British plantation companies operating from their headquarters in London, and more liberal marketing system was established. Secondly, analysis also showed that developing countries such as India and Pakistan and Middle East did not have sufficient refining capacities to import and process crude palm oil from Malaysia. It was then decided to encourage the establishment of refineries to enable the developing countries to import larger quantities of processed palm oil for direct consumption. These early moves were indeed winning strategies for palm oil. Because of the resultant increase in demand, producers were able to enjoy an increase in the price of palm oil while refiners who put up their plants in the 1970s and 1980 obtained lucrative refining margins. Even though the production and supply of palm oil were increased, price continued to increase, which is a unique achievement, despite the expectation that an inverse relationship usually occurs between supply and prices for commodities. The overall effect is for producers to enjoy maximum benefits of increased revenue derived from both higher prices and larger quantities of palm oil production.

Strategies against threats from competitor during 1980 to 2000 period During the second phase for period 1980 to 2000,palm oil was seen as a major competing product by other oilseed producers such as American Soybean Association (ASA). Smear campaigns on tropical oils conducted by the ASA in the late 1980s caused palm oil prices to suffer a big discount to soybean oil. With USA reducing their importation on palm oil, due to the adverse publicity, it was necessary for the Malaysian palm oil industry to find additional market outlets for its palm oil. At the same time the scientific truth to refute the smear campaign had been established. Malaysia began investing in refineries in major consuming countries so that more palm oil products could be exported to these countries, to compensate for reduced imports by the USA. Refineries were established in China, Vietnam, Pakistan, Egypt, UK, and USA and Mexico. These refineries enable Malaysian exporters to understand the demand pattern for oils and fats in those countries and where potable and viable, palm oil was exported to these destinations to create new demand to help prices to increase. New market outlets for palm oil products were created additionally by the rapid establishment of oleochemjical plants during the late 1980s and early 1990s. This helped to bring extra demand and price recovery for palm oil, and additional revenues to palm oil producers enabled them to withstand the competition despite the discount in palm oil prices suffered as a result of the anti-palm oil campaign. Numerous nutrition research projects were commissioned by the Malaysian Palm Oil Board (MPOB) in the major consuming countries to counter the negative allegations on the health attributes of palm oil in food, propagated through the anti-palm oil-campings. It took about 15 years and 160 nutritional studies all over the world for palm oil acceptance to be re-established. The winning strategy used was to show that hydrogenated fats, when used in the diet, were the main culprit in giving adverse health effects because of the presence of trans-fatty acids. Research shows that trans-fatty acids increased the bad LDL cholesterol and reduced the good HDL cholesterol. This essentially limits the potential use of liquid oils which have to be hardened by hydrogenation for making solid fats products such as margarine and shortenings. In essence, the anti-palm oil campaigners, it is the liquid oils which are used mostly in the hydrogenated from which now have to be labelled because of the presence of undesirable trans-fatty acids. As a consequence, the demand for palm oil has increased sharply especially in the USA as it has become the preferred raw material to replace hydrogenated soft oils for manufacture of solid fats products. To be doubly sure of the nutritional acceptance of palm oil in the USA, research was conducted which showed that using 50% palm oil blended with local oils provided an improved cholesterol ratio which reflects a health benefit to the consumers. The finding was patented functional claim to be printed on labels of the blended palm oil products sold in US under the brand Smart Balance. Research was the main tool used to overcome the negative image of palm oil but extra research on hydrogenated fats helped established the truth on what caused cholesterol level to be elevated, and this favourable fiding helped to double the demand for palm oil to fil the gap for the non-acceptance of hydrogenated liquid oils in the preparation of solid fat products. The winning strategy through the offer of a patented blend of palm oil products with an approved health claim on product labels was further fortified by additional nutrition studies.

Productivity The past productivity data for crude palm oil (CPO) production shows a stagnating yield pattern over the last 10-year period. The current yield is 18.88 tonnes of fresh fruit bunches (FFB) per year, which showed even a decline by 0.5% compared to 18.99 tonnes FFB per hectare per year registered in 2005. The smallholders sector, both organized as well as independent has been quoted as part of contributing factor to yield stagnation. In order to raise productivity incrementally until achieving the national target of FFB yield of 35 tonnes per hectare per year by 2020, both immediate to long term strategies concern bigger scale of operation, extension on proper application of fertilizer, good harvesting standards, replanting to optimal age profile and refraining from planting on marginal soils. If the productivity target can be achieved, the competitiveness of palm oil producers from Malaysia will be greatly enhanced.

Labour Shortages Unlike in the 1960s and early 1970s, when labour was both abundant and cheap, the current situation had completely reversed. Labour supply, especially from the domestic source has declined tremendously. The oil palm industry is currently relying heavily on labour sourced from neighbouring countries. These labours are relatively difficult to obtain and their wages and the cost of acquisition are relatively expensive. With the scarcity and high expense of obtaining labour, the alternative, which is mechanisation, become increasingly more inevitable. Many field operations such as weeding, transportation and fertiliser application are mechanised. One of the most important plantation activities, harvesting, is still being undertaken manually. However, research into design of a workable mechanical harvester is currently been intensely pursued.

Limitation of Land The utilization of land resource in the country is well guided by National Agricultural Policy with the government setting aside 19.4 million hectares (60%) under forest and 6.5 million hectares (20%) under agriculture including plantation crops while the remaining 6.95 million hectares are being allocated for others uses. The progress in oil palm planting has slower down in recent year due to the limited availability of suitable land. Most new plating are only occurring in Sabah and Sarawak where land is still available. Sarawak has 65% of its land under forests and it has only been able to develop less than 5% of its land area for agriculture.Conclusion The Malaysian oil palm industry has been a success story of agriculture development. Lt will continue to be the main crop of choice in view of its economic attractiveness. The industry is set to propel towards attaining greater heights. However, further expansion of oil palm in the country will be constrained by limited land resources except in Sabah and Sarawak. Labour is also becoming a problem with industry increasingly being dependent on imported labour is also becoming a problem with industry increasingly being dependent on imported labour . Increase in supply and improvement in competitiveness have to be achieved by increasing yield and productivity. New strategies will have become very cost competitive and have huge tracts of land for further expansion of their oilseed cultivation. Further reinvestment strategies in downstream activities are crucial to ensure continued competitiveness for Malaysia to stay ahead as the leading nation in the world oils and fats complex. The route to wealth creation involves charging the mind-set of industry-players to countinue to fully exploit and capitalize on the inherent strength of palm oil industry. The industry should aim to create not only a comparative but also a competitive advantage by venturing aggressively into new value-added products. The bio-fuel industry has created a new market outlet for palm oil. It will continue to help palm oil to have a remunerative price, which correlates closely to the price of petroleum products. Knowing that petroleum is a diminishing resource, it prices will likely remain high, and by association palm oil prices will similarly be remuneratively high in the future. The recognition of Malaysian oil as a sustainable and high quality source of oil for the worlds food and non-food industries is part of effort to promote greater acceptance of product based on the Brand Malaysia initiatives. Malaysian palm oil has a good storey to tell and with the right brand support, Malaysian palm oil can remain a dominant branded product is the world market in the future.

FIG 7.1

Malaysia palm oil exports major importing countries: 1990-2010(000 tonnes) Sources: Malaysian Oil Palm Statistics, various issues.

Export Destination and Performance Most countries in the world have huge deficits in oilseed and fats products. China, the European Union, and India are the world top three net importers. However, only three countries, namely Malaysia, Indonesia, and Argentina, are able to supply a large volume of oils in the global market at current time. Palm oil, mainly supply a large volume of oils in the global market at the current time. Palm oil, mainly exported by Malaysia and Indonesia, is the highest exported oil capable of meeting the world deficit in fats and oils. Therefore, the Malaysian palm oil industry is playing a dominant role in the international vegetable oils market. In 2010, Malaysia became the worlds second largest exporter of palm oil, which includes CPO and PPO. Compared to 2009, Malaysia exports of palm oil increase by about 4.9% from 15.88 million tonnes to 16.66 million tonnes on 2010. Fig 7shows that during 1975 to 2000, the processed palm oil (PPO) accounted for the biggest stake of total Malaysian palm oil exports (around 97&) and the rest is accounted for by the CPO. However, this ratio changed recently as Malaysias export 1.5 million tonnes (or 16% of total palm oil exported) by 2009. In 2010, palm oil food in the vicinity of around 17 million tonnes, which was 47% of the total world palm oil exports in that year, thereby, topping the list of the major world exporters of palm oil. Indonesia followed closely with a share of 46%. Malaysia alone contributed 27% to the global oils and fats exports in 2010, qualifying it to be larger oils and fats exporting country in the world. In 2010, most of Malaysias palm oil (59%) was exported to top five importing countries, namely China, the European Union, Pakistan, the United States, and India. Around 20.9% of the total Malaysian Palm oil exports went to China, and the rest was exported to Pakistan (12.8%), the European Union (12.4%), India (7%), and the United States (6.2%). The changing trend of the palm oil exports to major importing countries is depicted in Fig 7.1. China has been the major importer of Malaysias palm oil, and it continues to maintain its position as largest palm oil export market for nice consecutive years, with off-take totalling 3.48 million tonnes or about 21% of total palm oil exports (MPOB,2010). Fig 7.3 also shows that 2010 the exports of palm oil to China decreased by 13.5% or 0.54 million tonnes from its previous years level to 3.48 million tonnes. The major contributing factor for this significant decline was the higher imports of soybean for local crushing activities in China (MPOC,2010).India vegetable oil use swings dramatically between palm oil soybean oil since the import demand there is sensitive to the change of palm oil prices and country trade policy (Carter rt al., 2007). In India, the import duty is applied to the palm oil products. This duty is based on the agreed rate with the World Trade Organization (WTO) members and it is changing due to the palm oil price changes. For example, if the price of palm oil decrease, the import duty bound rate will be raised up by the Indian government in order to control the Palm oil import demand. Consequently, the price of palm oil exported to India will be affected by rate of import duty.