13 August 2001(Business Times) - PALM oil companies, committed to supplycrude palm oil (CPO) for the government-initiated CPO burning project, areasking for a review of the purchasing price.

Malaysian Palm Oil Association (MPOA) chief executive M.R. Chandran saidthe current RM725 a tonne which the Government pays for the CPO should beincreased now that prices are more than RM1,200 a tonne.

"We will bring this matter up with the Government soon," Chandran toldBusiness Times.

The Malaysian Palm Oil Board (MPOB) and MPOA had signed a Memorandum ofUnderstanding (MOU) last May, where the plantation companies agree tosupply the CPO to the Government at RM725 a tonne.

The Government in turn sells the CPO to Tenaga Nasional Bhd at RM700 atonne to power up its power plant.

The difference of RM25 a tonne will be fully subsidised by a Palm OilPrice Stabilisation Fund set up to cover expenses and cost incurred by theburning project.

The fund was introduced by the MPOB and it is called the Cess Order 2000.

The palm oil industry contributed to the fund at RM4 a tonne of palm oilproduced.

The CPO burning project was initiated to reduce the national palm oilstockpile which had hovered above one million tonnes for some two years.

However, the project took a backseat when industry players did notanticipate that 80 per cent of Tenaga's power generators are gas-firedrather than diesel-fired.

The project has now shifted to Sabah and Sarawak and industrial boilerssuch as glass and brick making factories which rely heavily ondiesel-fired burners.

It is understood that the project is currently on-going on a research anddevelopment basis to provide in-valuable data and act as a safety netshould prices plunge again.

The project was mooted by Primary Industries Minister Datuk Seri Dr LimKeng Yaik in May and was slated to take away some 500,000 tonnes of CPO or10 per cent of national production by year end.

Malaysia's palm oil has been going through tough times for the past oneyear due to high production and intense competition form other edible oilsof the world such as soyabean oil, rapeseed oil and sunflower oil.

It took a turn for the better on July 12 when prices broke the RM1,000 atonne mark for the first time in 13 months after languishing between RM600to RM700 a tonne.

"CPO prices was selling at RM750 per tonne then.

The selling price should be increased now in view of favourable prices,"said Chandran.

"It is not immediately known how much has been collected from the fund butproduction figures since May should total at least three million tonnesnow.

"With the cess of RM4 per tonne, the fund should be at RM12 million by nowand should be sufficient to cover expenses of the burning," he said.

"We have reached our objective which was to reduce end-stocks and improveprices.

It should be reviewed now," Chandran said.