KUALA LUMPUR, Feb 5 — Malaysia has issued this year's tax-free crude palm oil export quotas of 3 million tonnes after weeks of delay, sources said on Sunday, ending speculation it would scrap the quota to help its refiners compete with Indonesian rivals.

Sources with direct knowledge of government plans said some palm oil firms like IOI Corp and state run plantation agency FELDA last week received their quotas. The total quotas account for 15.5 per cent of projected output this year in Malaysia, the No.2 producer.

The move ends weeks of talk that Malaysia would scrap the quota, which has tightened regional supply for its refiners after Indonesia raised its own export tax for the crude grade to jump-start its own processing industry.

Malaysian refiners now struggle to compete against Indonesian rivals who enjoy better margins, with growing national output and refined palm oil export taxes that were slashed last year to half of that of the crude grade.

“The refiners have not been forgotten. The government is looking at providing incentives to refiners to encourage them to go further downstream and produce higher value products compared to Indonesia,” said a government source.

“The incentives will be done via special funding from the government. There will be an announcement at the end of this month,” added the source.

The 2012 tax-free export quota for crude palm oil is less than the 3.6 million tonnes shipped out without any tariffs to Malaysian owned refiners in Europe and Asia.

Malaysia does not tax refined palm oil shipments to protect its domestic processors and imposes a 23 percent duty on crude palm oil exports that are not under the quota. — Reuters