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Mahamad Rodzi Abdul Ghani




Mahamad Rodzi Abdul Ghani


Business Times



Below-par palm oil mills may lose licences
October 10 2003 - PRIMARY Industries Minister Datuk Seri Dr Lim Keng Yaikyesterday lashed out at 49 underperforming palm oil millers, threateningto revoke their licences if they do not improve their operations.

The 49 millers are considered to be operating below the industry’s minimumstandards.

There are 374 palm oil mills in Malaysia, owned either by companies, theGovernment, state entities or private individuals. They have a combinedthroughput of 74.4 million tonnes and their capacity utilisation rate hasbeen between 80 and 90 per cent for the past 12 years.

Out of the 49 mills under scrutiny, 17 are owned by various governmentagencies, which include the Federal Land Development Authority, theFederal Land Consolidation and Rehabilitation Authority, the RubberIndustry Smallholders Development Authority and state agriculturedevelopment corporations.

Another 22 mills or almost half the total are from independent orresource-dependent mills. The remaining 10 mills are not specified.

Dr Lim said the 49 mills are not fit to be in the business and aredragging the whole industry down with their below-par performance anduncompetitiveness.

The Government is not cruel but they must pass the minimum standards tostay in the business. They have been given ample warnings and if theystill do not perform, part of the action might be the revocation of theirlicences, Dr Lim told reporters in Bangi, Selangor, yesterday. He did notmention a time-frame before action would be taken against the millersconcerned.

Dr Lim earlier officiated at a seminar on Productivity Improvement in PalmOil Milling and chaired a dialogue with the milling sector. Also presentwere ministry deputy secretary-general Datuk Teo Suat Cheng, MalaysianPalm Oil Board chairman Tan Sri Basir Ismail and its director-generalDatuk Dr Yusof Basiron.

The 49 mills recorded an oil extraction rate (OER) of less than 18 percent, below the industry average of 18.6 per cent last year. The currentindustry average for the OER is 19.6 per cent. Dr Lim’s wants the industry’s OER to hit 25 per cent.

OER is the ratio between the available amount of crude palm oil that canbe squeezed out compared with a fresh fruit bunch plucked from an oil palmtree.

Dr Lim said part of the reason why these mills are recording a low OER isthat some of their parent companies and agencies have yet to replant their13m high oil palm trees that are more than 25 years old. Some 300,000ha ofoil palm plantations fall into this category.

Dr Lim said the millers must buck up to keep the industry competitive infacing competition from the world’s other 16 edible oils and fats andemerging major palm oil producers such as Indonesia.

The Malaysian palm oil industry’s OER fluctuates from year to year,registering 19.01 per cent in 1984 and gradually increasing to 19.8 percent in 1997/1998. Last year, 135 mills or 38 per cent of the 374 millsrecorded an OER of 20 per cent and above compared with 26 per cent in 2001and 18 per cent in 2000.

Eighty mills recorded an OER of 21 per cent and above in 2002 comparedwith only 40 mills in 2001. Some mills have already achieved an OER of 23per cent and even up to 24 per cent in some months.

Out of the 374 palm oil mills, 250 are in Peninsular Malaysia and theremainder in Sarawak and Sabah. There are 37 more mills with a combinedcapacity of 5.7 million tonnes under planning and construction.