PETALING JAYA, Aug 10 (Bernama) -- Prime Minister Datuk Seri AbdullahAhmad Badawi said the government was formulating a national biofuel policyto encourage the production and use of palm oil based biofuel as analternative and environment friendly energy source.

The policy is expected to stabilise palm oil price at a higher levelthrough the increased usage of the commodity, he said at the CommoditiesIndustry Awards Dinner 2005 here Wednesday.

He said the policy would encompass a three-pronged strategy which is theproduction and use of biofuel for the transportation and industrialsector, biofuel production for export purposes especially the Europeanmarket as well as the commercialisation of biofuel technology as a homegrown technology by the Malaysian Palm Oil Board (MPOB).

For a start, four initial measures would be implemented, he said.

First would be the fixing of the composition of the biofuel which wouldcomprise five percent processed palm oil biofuel and 95 percent diesel oil(B5 Blend).

The second measure would be to encourage the trial use of biofuel by thepublic, while oil companies would be asked to work together with MPOB toestablish the pioneer petrol stations for biofuel.

The third move would be the development of certification and standards forthe new diesel by Sirim Bhd and the fourth would be the establishment of acommercial palm oil biofuel plant in Labu, Negeri Sembilan for exportpurposes.

Abdullah, who is also Finance Minister, said that in the mid term period,the measures taken to implement the national biofuel policy would coverthe enactment of the National Biofuel Industry Act as well as the creationof several incentives.

"The establishment of a demonstration plant for the production of biofuelfor cold climate, appointment of plantation companies for the supply ofpalm oil for the production of biofuel in a consistent manner, and theprovision of warranty by auto companies for their engines which use palmoil based biofuel, have been also suggested.

"I hope the people would accept these measures well and use biofuel to cutdown on the usage of diesel which is costly and at the same timecontribute towards the protection and care of the country's environment,"he said.

Currently palm oil biofuel is used by a number of European Union countrieslike for transport and industries. In Germany, it is used for commercialtrains.

Last year, world demand for biofuel totalled 2.5 million tonnes and isexpected to increase 25 percent a year.

Abdullah wants estate management mechanisation to be expanded nationwideso as to reduce dependence on labour.

He said that the agriculture sector is facing labour shortage and had torely on foreign workers.

Up to May 2005, there are more than 1.6 million foreign workers, with 27percent working in the plantation sector.

Apart from mechanisation and modern equipment, Abdullah said that largescale estate management on a commercial basis via consolidatingsmallholdings should be practised.

"The government will consider providing incentives and assistance toparties involved in the consolidation and supports the efforts of suchplantations," he said.

The Prime Minister also wants the private sector, especially hugeplantation companies, to play a role in helping to increase theproductivity of smallholders.

"For example, huge plantation companies can help local smallholders byproviding quality seedlings and by giving advice," he said.

"Apart from that when the crops are harvested, these big plantationcompanies can help to market the products or to purchase the productsdirectly from them for processing," he said.

Later, Abdullah presented awards to various winners.

The winner for the smallholder category was Zakaria Ahmad, for productbrand development the winner was Carotino Sdn Bhd, innovation was won byEkowood International Bhd, Small and Medium Industry went to ScenicMoulding (M) Sdn Bhd, the factory award was given to Hartalega Sdn Bhdwhile the winner for Scientist Innovation Work was Dr Choo Yuen May.

-- BERNAMA