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Indonesia looks at policy revamp to save biodiesel programme

Posted by Guilherme Bezzarro

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Policy changes are needed in Indonesia so the country can keep up subsidies to its biodiesel programme, Reuters reported the head of a government agency as saying on 2 December.

It is mandatory for diesel to be blended with 30% bio content (B30) in Indonesia. However, plans to increase this to 40% had been delayed due to funding issues, Reuters said.

President director of the Estate Crop Fund Agency (BPDP) Eddy Abdurrachman made the comments at the Indonesian Palm Oil Conference on 2 December.

“The price gap between crude palm oil and diesel widened in 2020, posing a challenge to the sustainability of the support programme, especially the mandatory biodiesel program,” he said.

The BPDP is the agency in charge of collecting and managing palm oil export levies.



It was projected that in 2021, there would need to be a significant increase in funds, Abdurrachman said, estimating that Indonesia would consume 9.59M kilolitres of biodiesel next year.

Indonesia’s biofuel programme aimed to maximise domestic use of palm oil and cut imports of oil. However, a slump in crude prices this year had made it less economical, Reuters said. “Policy adjustments are required,” Abdurrachman said.

Paulus Tjakrawan, of the Indonesian Biofuel Producer Association, told the conference that the price gap between the bio component in biodiesel – fatty acid methyl esters (FAME) made from palm oil – and diesel had risen to around US$400/ tonne in 2020 from around US$100 last year.

Indonesia needed to either increase palm levies, impose an excise tax on fuel or make palm companies contribute to subsidies to sustain the programme, Bustanul Ariffin, an economist at the Institute for Development of Economics and Finance, told the conference. The progamme may suffer a 12.2 trillion rupiah (US$865.25M) deficit next year, he said.

Since June this year, Indonesia had collected a maximum US$55/tonne levy on palm oil exports, regardless of the price, Reuters said.

In September, Indonesia’s chief economic minister Airlangga Hartarto had told Reuters there were plans to revise its palm oil export levy rules to allow higher collection when prices increased, but no regulation had been issued to date.

Energy ministry official Dadan Kusdiana told the conference that Indonesia’s 2020 biodiesel consumption was equivalent to 165,250 barrels of oil/day and saved the country US$3.09bn in foreign exchange and 25.6M tonnes of carbon.

Source: OFI Internacional