Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on February 13, 2019

PUTRAJAYA: Malaysia is mulling over establishing a fund to help contain price fluctuations of biodiesel, to ensure the fuel remains attractive to domestic consumers, said Primary Industries Minister Teresa Kok.

Kok said she had proposed the biodiesel stabilisation fund at a cabinet meeting but further discussions are needed on the matter.

“We still need to have deeper discussions with other ministries [such as the] ministry of finance, the Prime Minister’s Department and ministry of international trade and industry, among other [relevant] ministries.

“We can also check how Indonesia and Thailand implement such systems and set up a stabilisation fund, and we can emulate them,” she told reporters on the sidelines of an industry forum yesterday.

Meanwhile, Kok said officers from her ministry will undertake compliance checks at petrol stations locally with the mandatory B10 programme’s commencement on Feb 1. She called for petrol station operators’ cooperation to provide biodiesel with the minimum bio-content, especially to diesel car users. Together with the B7 programme for the industrial sector starting in June, the mandate is said to mop up 761,000 tonnes of palm oil annually.

Malaysia is also targeting to increase the blending percentage next year from B10 to B20 for the transportation sector, and from B7 to B10 for industrial diesel use, which could help with the uptake of some 1.3 million tonnes of crude palm oil (CPO) per annum, said Kok.

This move will reduce high stock levels, and encourage stable as well as better CPO prices, whereby an increase of RM100 per tonne in CPO price could help generate an additional RM2 billion revenue for the country, she added.

As at end-January, Malaysia’s palm oil stockpiles eased 6.7% to three million tonnes, as production fell 3.9% from the previous month while exports jumped 21.2%, industry regulator the Malaysian Palm Oil Board (MPOB) said on Monday.

At the forum, LMC International head of Southeast Asia Dr Julian Conway McGill said an effective implementation of the biodiesel mandate would have to be funded, flexible and based on the free market. “The policy needs to be funded. It sounds trivial, but it’s actually the biggest problem. Someone needs to pay the [price] difference between biodiesel and diesel, and the costs of producers ... in many cases, it’s the government [who pays]. The volume also needs to be sufficient to move the market.”

According to McGill, volumes should be reduced when stocks are tight to prevent overheating in the market, and increased when biodiesel is cheaper relative to diesel, and vice versa.

The allocation mechanism should not just be transparent and fair, but also be based on regional action rather than capacity for a better efficiency, akin to that of Brazil, he added. The benchmark CPO contract for May delivery settled RM11 lower at RM2,274 a tonne yesterday.

      Print
      Text Size
      Share