28/04/2011 (Bangkok Post) - Oil palm manufacturers are concerned about whether they will receive compensation from the government for helping stabilise prices over the past several months.

The government owes the producers a total of 164 million baht and should speed up the payments as its term is nearly over, said industry executives.

In a bid to solve the local shortage of cooking palm oil over the past few months, the government used several measures. Among them was importing 30,000 tonnes of crude palm for refiners to make cooking oil and sell at the below-cost 47 baht a litre while pledging to compensate the refiners at the rate of 3.20 baht a litre.

Another attempt was to ask palm oil crushers to supply 15,000 tonnes of crude palm for refineries at cheap prices to keep the end-product price at 47 baht a litre. It promised to pay 9.50 baht a litre in compensation to the crushers.

Wiwan Boonyaprateeprat, secretary-general of the Thai Oil Palm and Palm Oil Association, said that the refiners and the crushers had yet to be compensated.

"We understand the payment procedure takes time and a lot of paperwork is involved. The crushers in the programme were asked for receipts to show that they really bought the palm nuts from the planters," she said.

Ms Wiwan said that the ways the government handled the palm issue were complex and price-distorting, such as capping the retail prices while palm nuts were expensive.

But for now, the government should lift the six-baht-a-kilogramme cap on the palm nut price because most of the palm supply is entering the market during this time, based on the inventory reports of the Internal Trade Department.

Stocks of crude palm this month are 211,943 tonnes, and are forecast at 270,915 tonnes in May, 324,704 in June, 354,026 in July, and 403,232 tonnes by the end of the year.

Normal stock should be around 120,000 to 150,000 tonnes. The stock may indicate that the industry has returned to normal and have a bit of a surplus.

Therefore, the government should allow the business be dictated by market mechanisms.

"If the control measure is lifted, the current palm nut price would stay at around 5 baht per kilogramme, and cooking palm oil would rise slightly to 48 baht a litre," said Ms Wiwan.

Apichart Jongskul, secretary-general to the Office of Agricultural Economics, said that the National Oil Palm Committee, chaired by Deputy Prime Minister Suthep Thaugsuban, has instructed all parties to comply strictly with the government policy.

The committee learned that farmers did not receive six baht a kg for palm nuts but only 4.70 to 4.80 baht because of the lower oil content than the 17% set as the criterion.

According to Mr Apichart, the production of palm oil this year would be about 8.9 million tonnes, down from previous projection 9.17 million tonnes.

The high level of surplus prompted the committee to encourage the Energy Ministry to proceed with its biodiesel plan.