KUALA LUMPUR - Malaysia aims to double the palm oil content in biodiesel used for the transport sector to 20 percent next year, as Southeast Asia's third-largest economy looks to cut record stockpiles and boost prices, a government minister said on Tuesday.
The government will also raise the palm oil content in biofuel for the industrial sector to 10 percent next year from a 7 percent quota being rolled out this July, Primary Industries Minister Teresa Kok said, speaking at a conference.
Malaysia's palm oil inventories fell to 3.001 million tonnes in January on increasing demand and falling production, but that was still near the two-decade high of 3.22 million tonnes recorded a month earlier.
The increases in the amount of palm oil mandated for biodiesel - know as B20 for transport and B10 for industrial use - should lift use of the vegetable oil in biofuels to 1.3 million tonnes annually, the minister said.
Kok said her ministry has submitted a proposal to the cabinet to set up a biofuel stabilisation fund to manage the price of biofuels, a similar mechanism to the export levy fund imposed by fellow palm oil producer Indonesia.
"What if the palm oil price is high and the diesel price has gone up a lot That would be costly for the public to use biodiesel, so we need to stabilise the price so biofuel will be more attractive to consumers," Kok said.
"I have suggested (a stabilisation fund) in cabinet meeting before but we still need to have deeper discussion with other ministries."
Top palm producer and exporter Indonesia began collecting levies from palm exporters in 2015 to help finance the development of its palm-based biodiesel programme, as well as funding other palm oil agenda, such as replanting.
However, Indonesia's government temporarily removed the levy in November after a sharp drop in prices hit farmers.
(Reporting by Emily Chow; Editing by Kenneth Maxwell) ((Joseph.Sipalan@thomsonreuters.com; +60323338019; Reuters Messaging: firstname.lastname@example.org))