23/9/06 MUMBAI (Reuters) - Malaysia plans to complete a review of its biodiesel licensing policy by early next year, commodities minister Peter Chin told Reuters on Saturday.

"We will complete the review by the beginning of early next year," Chin, who is here to attend an edible oils conference, said in an interview.

"We are reviewing the whole way in which licences are being given, the way people have got licences, whether they are operating, and whether they are proceeding," he said.

Chin said the whole process would take a few months. "We will complete the review by the beginning of next year," he said.

Biodiesel producers would need to look at the cost of production and competitiveness against other fossil fuels and palm oil, he said.

Malaysia would be able to produce 300,000 tonnes of biodiesel in 2007, out of a total of 5.2 million tonnes which has been approved by the government.

Palm oil is made into bio-diesel, which competes with crude oil, to make fuels for cars, power plants and factories.

Palm oil is traditionally used in food and cosmetics, but rising biofuel demand has sent palm oil prices surging by 12 percent this year.

Malaysia plans to sell palm-blended diesel at domestic pumps by the end of this year and, along with Indonesia, has set aside 40 percent of palm oil output for local biodiesel production.

Malaysia and Indonesia are the biggest palm oil producers.

The minister said Malaysia hoped to produce about 16 million tonnes of palm oil in calendar 2007, up from an estimated 15.2 million in 2006.

Chin said he was "very hopeful" that India's imports of palm oil would increase with the country cutting duties on palm products.

India reduced import duties on crude palm oil and palmolein in August to 70 percent from 80 percent, while those on RBD palm oil and palmolein were cut to 80 percent from 90 percent.

Soyoil currently carries a 45 percent duty because of a WTO regulation.

India consumes about 11 million tonnes of edible oil a year and palm oil constitutes 40 percent of India's total edible oil imports of more than 4 million tonnes.

India imports palm oil from Malaysia and Indonesia and soyoil from Argentina and Brazil.

Asked if there would further cut in duties, Chin said: "There is a possibility. The gap with soyoil will get narrower."

He said Malaysia has been impressing upon India that custom duties on palm and soy oils should be at levels at which the two could compete.

Chin said he expected a good demand for palm oil from China which is the traditional buyer along with India, Pakistan and Europe.

Malaysia was committed to maintain palm oil supplies to traditional buyers despite higher allocation for biodiesel, he said.

"Demand from China is good, it will be going up because many companies are doing joint business and joint ventures with them (Chinese companies)," he said.