Indonesia has begun seeding clouds in an attempt to create rain to extinguish blazes that have choked Singapore and Malaysia with smog, officials said Sunday, while launching investigations into plantation firms suspected of starting the fires.

The pollution index dropped to "moderate" in Singapore on Sunday after having hit "hazardous" levels but the smog intensified in Malaysia, with its government declaring a state of emergency in two southern districts.

An aircraft with cloud-seeding equipment late Saturday managed to unleash rain over Bengkalis district on Sumatra island, where some of the biggest fires are raging, Indonesian disaster management agency official Agus Wibowo told AFP.

"We will continue our cloud-seeding operations today (Sunday) using two aircraft," he said.

Indonesian police, meanwhile, said it was probing eight companies with possible Malaysian links that are suspected of starting the fires, a day after environment group Greenpeace said the blazes were on palm oil plantations owned by Indonesian, Malaysian and Singaporean firms.

Wibowo said the Pollution Standards Index (PSI) in Indonesia's Riau province, where the fires are burning, exceeded the hazardous 400 level in several locations.

Three helicopters also dropped water to douse fires on hundreds of hectares (acres) of carbon-rich peatland that have engulfed neighbouring Singapore and Malaysia in smog.

Malaysian Environment Minister G. Palanivel said the air pollutant index (API) hit 750 in the town of Muar -- a 16-year high -- on Sunday morning, with two other towns also reaching hazardous levels.

"The prime minister has signed a declaration of emergency for Muar and Ledang districts," Palanivel told AFP in a text message.

The highest ever API reading was 860 during the 1997-1998 haze crisis that gripped the region. Hundreds of schools have been closed since Thursday in Muar, which has a population of about 250,000.

Many Malaysians have begun wearing face masks as a precaution as the pollution levels have climbed.

Malaysia's API indicated that the capital Kuala Lumpur was also experiencing "unhealthy" air which has limited visibility to one kilometre (less than a mile), according to Palanivel.

The annual haze problem is blamed by Indonesia's neighbours for affecting tourism and public health. The haze hit its worst levels in 1997-1998, costing Southeast Asia an estimated $9 billion from disruptions to air travel and other business activities.

Singapore and Indonesia have lashed out at each other in recent days after the smog hit "critical" levels which the island-state said was potentially life-threatening to its ill and elderly.

However, Indonesian officials have become irate at the demands, and on Thursday the minister coordinating Jakarta's response to the crisis accused Singapore of acting "like a child".

Indonesia has also sought to shift some blame on Malaysian and Singapore-based palm oil companies for allowing slash and burn on estates they own on Sumatra, but the companies insist they have strict "no burn" policies.

Indonesian police said eight companies were suspected to have carried out the burning. "They are suspected to be Malaysian," Riau provincial police spokesman Hermansyah told AFP.

"We can't confirm yet if they are involved but the police and the government officials are on the ground to check and verify the information," he added.

Hermansyah was unable to say when investigations will be completed, but stressed that the government has outlawed the use of fire to clear land.

"It's a very serious crime. Fire starters can be jailed and companies can be sued. They usually do it at night in remote locations, making it difficult for us to trace them. But we will do our best to pin them down," he said.