17/01/2011 (Bangkok Post) - The Bank for Agriculture and Agricultural Cooperatives (BAAC) and Bangchak Petroleum Plc have teamed up to grow oil palm for a biodiesel project.

The state bank will allow the oil company to lease 1,200 rai of degraded tangerine orchards in Nakhon Nayok province to grow oil palm for its biodiesel production facility at Ayutthaya.

The two agencies are scheduled to sign an agreement on Jan 20 covering 50 million baht in loans for Bangchak to develop the site while the bank charges a low rental fee of 700 baht per rai per year.

The agreement helps the bank meet its goal to increase green lending and helps indebted farmers, while Bangchak gains a supply source and can develop a corporate social responsibility programme.

BAAC president Luck Wajananawat said the bank had more than 150,000 rai of land it could use as palm fields if needed.

Most of the soil is highly acidic as the degraded tangerine orchards in Ongkharak and Thanyaburi were owned by BAAC clients that defaulted on debts.

The 1,200-rai site will also house an intensive oil palm learning centre, including a research unit and cultivation site where experts can assist growers to use advanced technology and certain palm breeds to ensure high productivity.

With proper cultivation, productivity could rise to four tonnes per rai, above the average of 2.82 tonnes of oil palm in Thailand last year.

Bangchak president Anusorn Sangnimnuan said the project would help about 6,000 indebted farmers to grow oil palm, a higher-value crop with strong market potential.

He added that growing oil palm on the outskirts of Bangkok was a prudent method to prevent floods from ravaging the capital because the tree is a thirsty crop that needs proper water management for a high yield.

Bangchak is considering building an oil extraction facility on the compound once 50,000 rai are farmed there, providing a volume of 200,000 tonnes of palm oil a year.

The company's subsidiary, Bangchak Biofuel in Bang Pa-In near Ayutthaya, can produce 300,000 litres of biodiesel per day, but it has a contract with farmers in Nakhon Nayok and Ayutthaya.

Another prominent green loan by BAAC includes a tree bank project where loans will be extended for planting new trees. Mr Luck said private companies could take part under the bank's Tree-back Securities by depositing money and receiving a lower interest rate than general clients, with the difference financing the tree bank.

As of last August, 597 communities were taking part in the project, planting 2,905,700 trees, mostly woody perennials such as padauk, iron wood, and parawood.

The bank suggests farmers use a mixed-crop pattern rather than monoculture, growing woody plants to improve soil quality and earn more income.