The government has proposed to allocate a subsidy for the distribution of biofuel ranging between Rp 2,000 and Rp 2,500 (US$0.27) per liter in the 2011 state budget.
“The subsidy would only be given when the biofuel market price is higher than the market price
for oil-based fuel,” Energy and Mineral Resources Minister Darwin Zahedy Saleh told legislators at a recent hearing
He said the subsidy was needed to ensure that a fall in prices would not cause financial losses to companies already involved in the production of biofuel in the country.
This year, the subsidy allocated for biofuels was Rp 2,000 per liter.
Indonesia began using biofuel in October 2008 as part of a government program to reduce the consumption of oil-based fuels. Currently, the country produces bioethanol and biodiesel.
Bioethanol, made from cassava, sugarcane and sweet sorghum, is blended with subsidized premium gasoline, while biodiesel, made from castor and crude palm oil, is mixed with subsidized diesel.
Currently, subsidized premium gasoline contains at least 1 percent of bioethanol, while subsidized diesel contains at least 5 percent of biodiesel.
“We estimate the consumption of biofuel will reach 982,000 kiloliters in 2011,” Darwin said.
This year, the consumption of biodiesel is estimated to reach 777,075 kiloliters.
All biodiesel is supplied by domestic producers. Data from the ministry’s directorate for oil and
gas showed that the country’s production capacity reached 4.1 million kiloliters per day for biodiesel and 120,000 kiloliters per year for bioethanol.
Indonesia expects biofuel consumption to make up 5 percent of its total fuel consumption in
2025. Indonesia plans to boost biofuel consumption as subsidized fuel consumption continues to
soar in line with a bullish automotive market.
The revised 2010 state budget allocates the quota for subsidized fuel consumption at 36.5 million kiloliters this year, but the ministry estimates the actual consumption could reach 40.1 million kiloliters. The volume is estimated to further increase to between 36.77 million and 42.56 million kiloliters in 2011.
The first figure assumes that the government’s planned efforts to control subsidized fuel consumption would prove effective, while the latter is an estimation when the efforts are not taken.
The government has hinted at several efforts to control subsidized fuel consumption.
These include prohibiting all private cars built after 2000 from using subsidized fuels. Another option is to impose limits on sedans and luxury cars. The government has not issued any decision.
