Govt proposes higher biofuel subsidy

Alfian Idrisahmad ,  The Jakarta Post ,  Jakarta   |  Wed, 05/27/2009 1:22 PM  |  Business

The government proposed to the House of Representatives on Wednesday an increase to the biofuel subsidy totaling Rp 1.55 trillion (US$150 million) for next year.

Director general for oil and gas Evita H. Legowo told lawmakers on Wednesday that the increase in the subsidy is based a higher subsidy per liter for biofuels, from the initial proposal of Rp 1,000 a liter to Rp 2,000 a liter.

"The higher subsidy allocation is caused by the increasing international crude oil prices," Evita H. Legowo told legislators from the House of Representatives’ Commission VII overseeing energy and mineral resources.

Crude oil prices have increased from around $40 per barrel a few months ago to more than $60 per barrel now.  

The government has set a mandatory target to use at least 1 percent bioethanol in subsidized Premium fuel and up to 5 percent biodiesel in subsidized diesel fuel per year.

The government estimates that the country would need 214,541 kiloliters of bioethanol for Premium gasoline and 562,534 kiloliters of biodiesel for subsidized diesel fuel.

Based on the estimates, Evita said, the government proposes Rp 429.08 billion in subsidies for bioethanol and Rp 1.125 trillion in subsidies for biodiesel.

"The total subsidy we are proposing is Rp 1.554 trillion," Evita said.

The government's proposal is higher that the figure suggested by the Indonesian Biofuel Producers’ Association (Aprobi) who earlier proposed a total of Rp 1.25 trillion for the biofuel subsidy.

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