KUALA LUMPUR, May 5 (Bernama) -- The government will compensate or subsidise losses incurred by palm oil-based cooking oil suppliers due to the differences between the market price of olein and that fixed by the government to tackle the recent price increase in cooking oil by some suppliers.

The Minister of Plantation Industries and Commodities Datuk Peter Chin Fah Kui said this was to offset the effect of the hike in olein prices, which has led to the recent speculation of cooking oil shortages and price increase in some areas in the northern region of the peninsula.

"As far as we are concerned, there is a difference between the olein price and the price fixed by the government.

"There is of course a gap in the difference between the two because the fixed price is now no longer realistic in the sense that the price of olein has gone up in the market," he told reporters here today.

He said the current ceiling price for the 1kg packet was RM2.50, which could hardly offset the production cost of between RM2.70 and RM2.80 per kilogramme and had led some packers to produce cooking oil only in 2kg packets in order to cut back losses.

The average price of palm olein between January and April this year had increased following the average price increase in crude palm oil (CPO) at RM2,109.50 a tonne.

He said his ministry currently had about RM45.13 million that could be used for compensation which suppliers could claim in arrears from Jan 1 this year.

Chin said effective June 1, the government would also be imposing cess on millers, a method used in the past to offset price differences when olein prices soared beyond RM1,700 per tonne.

"This (hike in olein price) has occurred a few times before... in 1999 and 2004," he said.

However, he said the cess would only be imposed on estates and not smallholders, compared to the previous years.

The ministry was targeting a cess collection of RM45 million a month, he said.

He said the government was also reviewing the implementation of the Cooking Oil Price Stabilisation Scheme for this year to ensure the ceiling price and supply of cooking oil was sustained.

Currently, the approved ceiling price for cooking oil packets of 1kg, 2kg and 5kg are RM3.30, RM6.25 and RM13.35 respectively based on the price of palm olein at the RM1,700 per tonne level.

Chin said although CPO prices had soared, the government would maintain the ceiling prices of cooking oil which had been enforced since 1997 by ensuring an average supply of 50,000 tonnes of palm-based cooking oil a month for the local market.

He said next week, officials from his ministry and the Ministry of Domestic Trade and Consumer Affairs would be going around to inspect cooking oil supply and prices.

-- BERNAMA