29/11/2008 (NST Online) - THE Malaysian Palm Oil Board (MPOB) has the right to penalise processing factories which refused to accept oil palm fruit from suppliers.

State Agriculture and Agro-based Industry Committee chairman Ab Aziz Kaprawi said factories could no longer give excuses of dwindling prices for refusing to accept the fruits from smallholders and plantation owners.

He said the government had allowed factories to increase their storage capacity to cope with a likely oversupply of the fruit.

The plunging price of oil palm fruit has caused a glut of the commodity among smallholders in many areas of Johor.

The problem began last month when the price of oil palm fell from about RM700 a tonne to RM200 a tonne.

"The MPOB can fine factories that do not accept supply from smallholders. Oversupply is not an acceptable excuse as the government had eased regulations on a factory's storage capacity.

"For instance, a factory is now allowed to install extra storage tanks for palm oil," he said in response to a question from Datuk Tee Siew Kiong (BN-Pulai Sebatang).

Ab Aziz said a factory would be violating the regulations stipulated under their operating licences if they refused oil palm fruits from smallholders.

He said the Federal Government had also allocated RM200 million for smallholders and plantation owners to replant their crop after 25 years.

Under the plan which takes effect on Monday, each plot owner will be given RM1,000 for each hectare of oil palm land.

Ab Aziz said that 32,000ha out of a total of 670,000ha of oil palm land in Johor was expected to benefit from the programme.

"This replanting plan is aimed at decreasing the 700,000 tonne production and reducing the stock of oil palm fruit, which now stands at two million tonnes.

"Moreover, the plan will stabilise the price of the commodity. This method has been proven to increase the price of oil palm in the past."

Ab Aziz said the replanting scheme gave a chance for smallholders to integrate other crops in their plots while waiting for their replanting to start.

Among the "integrated" oil palm crops are sugar cane, pineapple, tapioca, fruits and vegetables.

Ab Aziz said the Federal Government was also in the process of abolishing the 15 per cent import duty on fertiliser, which had also affected the cost of production.

The current cost of palm oil production is RM1,250 per metric tonne.