09/11/2008 (iStockAnalyst) - ALL 403 palm oil millers throughout the country have been reminded that they must receive and buy palm fruits from planters, despite the current economics of low profits.

Mills operating at full capacity with no more storage space, however, are excused.

"All palm oil millers are mandated by law to take in the fruits from oil palm planters. Low profit margin is no excuse to reject planters' produce," Plantation Industries and Commodities Deputy Minister Senator Kohilan Pillay said.

He said the government is stepping up efforts to support palm oil prices by subsidising planters to chop down more old trees and replant with higher yielding clones.

This is aimed at lowering palm oil output in the immediate term while ensuring higher yield in four or five years' time.

The Malaysian Palm Oil Board (MPOB) enforcement team is closely monitoring operations at all the mills, Kohilan added.

"Millers who are not operating at full capacity, and yet reject fresh fruit bunches brought in by planters, will have their milling licences revoked by MPOB," the deputy minister told reporters after officiating at the Palm Oil Refiners Association of Malaysia (Poram) forum in Petaling Jaya over the weekend.

Kohilan was responding to reported complaints from some smallholders in Johor that suffered losses when millers rejected their fresh fruit bunches on excuse of low palm oil prices and thereby unprofitable to process.

This year, MPOB data shows that mills in Johor are running at 92 per cent capacity on average, a lot busier than last year's 81 per cent.

Asked why three months is needed to implement B5 mandate (five per cent palm biodiesel and 95 per cent regular diesel), Kohilan said an adequate timeframe is needed for diesel-powered vehicle manufacturers to extend warranty to biodiesel usage.

Oil companies too, need time to work out apportionment of costs with biodiesel producers.

From now until Febuary 2009, the government will engage with logistic companies, taxis and bus companies, on possible pricing mechanisms of biodiesel and whether fleet card subsidy is included.

Dialogues with consumer groups will also be conducted. Currently a litre of palm biodiesel is cheaper than regular diesel.

Should it become more expensive, Kohilan assured the public will not be burdened because biodiesel laws passed by Parliament in 2006 provide for mandates to be lowered in such instances.

"The MPOB has collected price stabilisation cess of some RM200 million from oil palm planters.

"This will go to subsidising biodiesel usage, if needed," the deputy minister said.