About 90 per cent of palm oil supply has always been and continues to be produced to make cooking oil, margarine, and vanaspati (vegetable ghee). The remaining 9 per cent is processed into everyday soap, moisturiser, shampoo and biodegradable laundry detergent.
THE government remains committed to implementing the biodiesel B5 mandate in four months although crude palm oil is trading at high prices.
It has allocated RM200 million to put up blending facilities nationwide to blend diesel with palm methyl ester from June 2011 to kick-start sales of the green fuel, after a five-year delay.
Yesterday, the third-month crude palm oil futures on the Malaysian Derivatives Exchange rose RM58 to close at RM3,515 per tonne.
Malaysia has been struggling to implement a mandate to push the blended fuel and support the palm oil industry that was first introduced in 2007 as more taxpayers' money is needed to subsidise biofuel blends to match diesel prices at the pumps.
Plantation Industries and Commodities Ministry undersecretary M. Nagarajan confirmed that B5, a blend of 5 per cent palm methyl ester and 95 per cent regular diesel, will be introduced in stages, starting from Selangor, Kuala Lumpur, Putrajaya, Negri Sembilan and Malacca.
"The blending facilities capital expenditure for the central region amounts to RM49.6 million of the total RM200 million," Nagarajan said. Among depots in the central region that is being fitted with blending facilities are Klang Valley Distribution Terminal, Tangga Batu, Port Dickson, Westports and Northport.
Nagarajan was speaking at the "Palm Oil Economic Review and Outlook Seminar 2011" organised by the Malaysian Palm Oil Board in Kuala Lumpur yesterday. He said there will be an allocation for B5 subsidy via the automatic price mechanism.
When asked for an estimate, Nagarajan told Business Times that "at current world oil price, we're looking at subsidies ranging from 5 to 7 sen per litre".
He also said the Finance Ministry had agreed in principle to lift the 10 per cent tax on the sale of biodiesel in the country. "The effective gazette date on the tax exemption on biodiesel sales will be announced later," Nagarajan said.
While some people do not agree that taxpayers' money be used to facilitate the implementation of the B5 mandate, there are others who view this move as a step towards ensuring energy security for the country.
Tropical countries like Malaysia and Indonesia are able to produce biodiesel at a fraction of the cost that in temperate countries like in Europe and North America by virtue of abundant sunlight and rainfall. This means grass, plants and trees including oil crops, are able to grow faster and in higher density in the tropics than in North America or Europe.
Therefore, it makes sense for Malaysia, a major palm oil producer, to set the example of using palm biodiesel domestically as it seeks to market and export the green fuel to energy-hungry countries.