Prime Minister Abdullah Ahmad Badawi on Monday announced that Malaysia will increase the quota for subsidised cooking oil to overcome a nationwide shortage of the vital commodity.

"To overcome the problem a meeting (to discuss the issue) decided to sharply increase the quota for the production of subsidised cooking oil with immediate effect," he said.

Supermarket shelves were stripped of cooking oil in several states last week, with retailers not able to replenish supplies fast enough.

Domestic Trade and Consumer Affairs Minister Datuk Shafie Apdal blamed the crisis on smugglers who cash in on subsidised Malaysian oil by moving it to neighbouring countries.

Abdullah said about RM800 million was spent annually on the cooking oil subsidy.

The shortage of cooking oil was caused by strong demand following recent religious celebrations and smugglers, he said.

Abdullah said he expected the shortage to be resolved in the next few days, adding that there would not be any price hike.

"The government has decided that it will not raise the price of subsidised cooking oil. There is also no need to ration the product," he said.

Malaysia is the largest palm oil producer and exporter in the world.