Committee proposes 2-2.5 percent mandatory use of biofuel

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Mon, 02/04/2008 7:03 AM  |  Business

The National Biofuel Development Committee has suggested the government make it mandatory for biofuels to constitute 2 to 2.5 percent of the nation's total fuel consumption.

This would equal 1.2 million to 1.5 million kiloliters (kl) per year.

Evita H. Legowo, the first secretary of the committee, told The Jakarta Post on Sunday it had been suggested the policy come into effect in July before the committee's tenure ended in August.

The policy would be imposed in every region across the country, not only in Java and Sumatra as previously proposed, she added.

"I don't think the policy will cause any problems as Pertamina (state oil and gas firm) is currently distributing Biosolar fuel with a biofuel content of 2.5 percent in most provinces in Indonesia," Evita said.

She said the proposed policy was quite realistic as the country was already producing between 1.5 million and 1.8 million kl of biofuel per year.

Evita said it had not been decided whether the policy would be applied in the industrial sector, the transportation sector, or both.

Of the 60 million kl of fuel the country uses annually, half of it is subsidized, while the other 30 million kl is used for commercial purposes.

Evita said it was likely the proposal would be aimed at the industrial sector, as the price of Biosolar was higher than the price of diesel or other fossil-based fuels.

She estimated that due to a surge in global palm oil prices, the price of Biosolar would be in the range of between Rp 7,000 (76 U.S. cents) and Rp 8,000 per liter, which is higher than conventional fuels, which are priced at around Rp 6,500 per liter excluding tax.

Evita suggested the government provide incentives in the form of tax exemptions for businesses in the industrial sector using biosolar.

In response to the proposal, biosolar producers said they planned to double production levels to meet increasing demands.

Indo Biofuels Energy operational director Lucia Liemesak told the Post her company planned to double its production capacity in March to 40,000 tons.

She said it was hoped production would reach 80,000 tons in June.

"We (biosolar producers) only produce 600,000 tons annually. But we are optimistic that in the next two to three months we will be able to produce 1.4 million tons," she said.

Due to a lack of support and unclear regulations from the government, the nation's biofuel businesses declined by 85 percent last year, with many other producers postponing their investment plans.

The Indonesian Biofuel Producers Association (APROBI) last year demanded the government make biofuel use mandatory at 1 percent of the country's total fuel consumption to help develop the industry.

Under the government's biofuel promotion plan, Indonesia will need to increase its consumption of biofuel to 5.29 million kl by 2010 and 9.84 million kiloliters by 2015.

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