The so-called B10 biodiesel programme will raise the minimum bio-content that local producers must put in biodiesel to be used in transport to 10% from 7%, potentially boosting demand for palm oil as a feedstock.

Primary Industries Minister Teresa Kok said the B10 programme would be implemented for the transportation sector in phases beginning from Dec 1, with mandatory implementation from Feb 1.

A B7 programme for the industrial sector will be implemented from July.

Malaysia, the world’s second biggest producer of palm oil after Indonesia, has taken a hit from a recent slump in the price of the vegetable oil.

Benchmark palm oil prices slumped to a near three-year low last week due to high inventories, rising production and sluggish demand.

Kok said the B10 programme would increase local consumption of crude palm oil and help reduce stocks.

“At the current low price of palm oil, now is the right time to implement the expanded biodiesel programme,” she said.

The higher mandate is expected to consume about 761,000 tonnes of palm oil annually, she said.