The Malaysian cabinet has been studying a biofuels plan submitted by the commodities ministry a couple of weeks ago, Commodities Minister Peter Chin told Reuters in a telephone interview.

"I think it should be somewhere by the end of this month," Chin said in reply to a query on when the government would announce the plan.

Approval from the cabinet of Prime Minister Abdullah Ahmad Badawi would be the first step in taking the bill to parliament and making it law.

"I think we still have to work out some of the details before the prime minister is ready to announce it," Chin said. "We still have to do some polishing up."

Malaysia plans to blend palm oil with petroleum diesel in the ratio of two to five percent, media reports have quoted Chin as saying earlier.

On Thursday, he declined to give details, but said tenders had been invited for an $11-million plant that could produce up to 5,000 tonnes of palm fuel for export each month.

The plant, a joint collaboration between Golden Hope Plantations Bhd and the government-run Malaysian Palm Oil Board, is expected to be complete by the end of 2006.

Biofuels have taken on new importance worldwide as countries look to cut their emissions to adhere to the UN Kyoto Protocol. Burning the environmentally friendly fuel is considered carbon dioxide neutral and does not require emissions rights.

EU measures to reduce dependence on fossil fuel oil imports and cut greenhouse gas emissions have boosted interest in biofuels in Europe. The EU wants member states to use vehicle fuel with two percent biofuel by 2005 and 5.75 percent by 2010.

Japan has expressed interest in Malaysia's palm fuel, and officials say a German rail company that tried out a test mix was satisfied with the results and wants to buy it regularly.

But green fuels can be expensive and growing enough crops to meet global energy demand would take up unfeasibly large tracts of farmland, some experts say.