MALAYSIA'S PLAN TO BURN PALM OIL AS FUEL ON TRACK

KUALA LUMPUR, March 29 (Reuters) - Malaysia assured a sceptical palm oilmarket on Thursday that a plan to use crude palm oil as fuel was realisticand that the country's largest power generator had already started to doso."Yes...since the last few days, but slowly," Primary IndustriesMinister Lim Keng Yaik told reporters when asked if state-owned TenagaNasional Bhd had started burning crude palm oil (CPO) as part of a plan toease bloated stocks in the world's largest producer.Lim said Tenaga had started burning some 1,000 tonnes of crude palm oilalready supplied by the industry to its power plant. The firm was expectedto start burning 50,000 tonnes of the edible oil a month starting inApril, he added.Malaysia plans to burn around 500,000 tonnes of CPO as fuel this yearand to reduce stocks to a healthier level of 1.2 million tonnes soon.Stocks reached a record 1.52 million tonnes last November due to poorexports."We can burn (CPO). There's no problem. Do you want me to show you thatit can burn? You don't have to do anything...just burn it and it generatesenergy," said Lim.Lim said the government together with Tenaga would officially launchburning crude palm oil as fuel on April 12 at the firm's power station inthe northern state of Penang.

PALM OIL TO BE MIXED WITH FUEL OILMalaysia has embarked on an ambitious plan to get rid of at least onemillion tonnes of palm oil from the market this year through replantingageing trees and using CPO as industrial fuel.The measures are expected to boost prices to up to 950 ringgit ($250)tonne.Lim said the CPO would be mixed with medium grade fuel oil, a type ofoil used by Tenaga to run boilers and generators, in equal proportion tomake it liquid enough to be supplied for burning.The Malaysia Palm Oil Board (MPOB) had rented two tanks of 10,000tonnes capacity at Malaysia's main port Klang and also in Prai in Penangfor storage of palm oil for mixing, said Lim.The palm for fuel project has met persistent resistance from traderswho say Tenaga needs to set up a special plant to treat the CPO to make itburn, and this would take much time.Traders also say the crude palm oil is around 16 percent more expensiveas an energy source than normal fuel oil.

LIM SAYS MARKET IS CONFUSEDLim said the market seemed to be getting confused with biodiesel, whichneeds a special production plant."They can't differentiate between biodiesel and the burning of crude palmoil. Yes, it takes two years to build the processing plant for biodiesel.But that's a long term (plan)," he added.Lim said the 50,000 tonnes of CPO to burned next month by Tenaga wasbought at 725 ringgit ($190.78) per tonne. The government has alsoproposed the estabilishment of a palm oil stabilisation fund through a taxon all CPO produced."This fund will be used for buying the rest of the CPO (450,000 tonnes)at market prices in order to supply (Tenaga) at a price of 700 ringgit atonne," said Lim."The fund will be used to subsidise the difference between the marketprice and the supply price," he said.The government also planned to reinstate the tax collection to 11ringgit ($2.8) a tonne from the current seven ringgit."This new cess collection at 11 ringgit/tonne will start from May 1,2001 and will be revised as prices move up."It is hoped that 80-90 million ringgit will be collected for this fundwhich will be used to buy CPO from the market to be supplied to (Tenaga)at 700 ringgit/tonne as a burning fuel," said Lim.(US$1 = 3.8 ringgit)