Selling biofuel will become mandatory for fuel retailers under a policy announced Tuesday, but the government is offering no incentives for compliance.
The government will soon require fuel retailers to ensure biodiesel accounts for at least 1 percent of their national fuel sales, Evita H. Legowo, director general for oil and gas at the Energy and Mineral Resources Ministry, said.
For bioethanol, the minimum requirement will be 3 percent.
"These percentages are subject to change because I still need to have one more meeting with stakeholders to make sure we can move forward with this policy. The regulation itself is expected to be issued in October," Evita said.
She said she believed the policy would help the country reduce its dependency on fossil fuels.
Under the policy, the government will increase the mandatory percentage of biofuel in all sectors annually.
"Our target is for biofuel to contribute 5 percent of the national energy portfolio by 2025," Evita said.
The policy allows authorized fuel retailers, including state-owned PT Pertamina, Netherlands-based Royal Dutch Shell and Malaysia's Petronas, to blend the biofuel.
Of the 4,050 fuel stations owned by Pertamina, only 279 sell biofuel.
"Because of small demand, biofuel currently accounts for only between 2 and 3 percent of our total production," Pertamina spokesman Wisnuntoro said.
Last year, Pertamina's fuel production reached 652,000 barrels per day.
Pertamina currently sells three biofuel products: Biopremium, Biodiesel and nonsubsidized Biopertamax.
Motorists remain reluctant to buy biofuel because it is no cheaper than subsidized fuel. The price of Pertamina's Biosolar, for example, is set at Rp 5,500 (59 US cents) per liter, which is the same price as for subsidized diesel fuel.
The price of Biopremium is also similar to that of Premium, which is priced at Rp 6,000 per liter.
Although Pertamina had no difficulties in coping with the mandatory policy, Wisnuntoro said the company hoped the government would provide subsidies for biofuel.
"Under the current regulation, Biopremium and Biodiesel are actually considered as subsidized fuel. But, as of today, Pertamina will receive no subsidies for their production," he said.
Shell spokesperson Fathia Syarif said the government should take company profits into consideration when forcing biofuel on the transportation sector.
"For the use of biofuel to become sustainable, it must also be economically feasible," she said.
The government is also requiring manufacturing companies to use at least 2.5 percent biofuel in their fuel consumption, under a regulation to come into force in October.
Meanwhile, visiting Malaysian minister for plantations, industries and commodities Datuk Peter Chin Fah Kui said his country would help supply biofuel to Indonesia when mandatory use was in place.
Peter said Malaysia had a biofuel production capacity of 1.5 million tons a year, although the actual annual production is 100,000 tons.
"One hundred percent of our biofuel is for export to the United States and Europe," he said.
