13/10/2008 (Reuters), Kuala Lumpur - Malaysia, the world's second-largest producer of palm oil, raised its annual export quota for crude palm oil by 50 percent as a surging inventory hurt prices, a government minister said on Monday.

The annual export quota for palm oil will be raised to 3 million tonnes from 2 million as part of government efforts to help reduce growing palm oil stocks, said Commodities Minister Peter Chin.

Prices of the tropical oil tumbled more than 60 percent so far this year thanks to a knock-out combination of swelling stocks, slowing demand that have been heightened by a weakening global economy.

Chin said his ministry also hopes to push for a biofuel mandate to require the replacement of five percent of domestic diesel consumption with palm-based biofuel.

"We are now looking at biodiesel mandate...which we hope to get a decision on by the end of the month," he added.

"With these three measures (replanting, biodiesel mandate and increasing the CPO export quota), we aim to reduce stock levels to 1.5 million tonnes," he told reporters.

Data released on Friday by the Malaysian Palm Oil Board showed that stocks rose 5.5 percent in September to 1,949,498 tonnes.

In 2006, Malaysia took the lead in developing Asia's biodiesel industry and granted licenses to more than 90 firms to set up biodiesel plants, leading to a sharp rise in palm oil prices.