Palm | Kelapa Sawit

The Plantation Industries and Commodities Minister plans to propose the sale of biodiesel with less palm oil content to reduce government spending for the initiative, known as the B5 mandate. Under the mandate, the government has set a January 2010 deadline to sell B5 biodiesel, a mixture of 5 per cent palm oil and 95 per cent diesel.

If the government sticks to B5, it will have to spend about RM250 million that is needed by the industry to blend the mix and distribute it to petrol stations. Minister Tan Sri Bernard Dompok said a more realistic alternative would be to revise downwards the blend ratio.

"I'll be proposing to the Cabinet to bring down the B5 mandate to B3 or B2. The B5 mandate, if it were to be fully implemented, would cost around RM240 million to RM250 million. This is a problem because ordinary diesel is already being subsidised by the government," he told Business Times and Dow Jones newswire in an interview in Putrajaya yesterday.

Malaysia had planned for the B5 mandate to be rolled out in stages, starting from February this year with government vehicles, followed by the industrial and transport sectors. So far, only Kuala Lumpur City Hall (DBKL), Selangor's Jabatan Kerja Raya (JKR) and the Army have been using biodiesel in their vehicles. They get their biodiesel supply from the Klang Valley Fuel Depot near Puchong, Selangor.

The B5 mandate is scheduled for full implementation at all pump stations throughout the country by January next year. Oil companies like Petroliam Nasional Bhd, Shell, Esso, Caltex and BHPetrol are positive on retailing biodiesel at the pumps, but when it comes to absorbing blending cost at all 36 fuel depots nationwide, they remain hesitant.

According to the Malaysian Biodiesel Association, there are 10 active biodiesel plants. Five are in Pasir Gudang, one in Kuantan, two in Lumut and the remaining two in Lahad Datu.These plants, which are built at seaports, are far away from towns and cities of high population. It costs extra money to transport biodiesel to the fuel depots to be blended with ordinary diesel.

Dompok 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," he said.