T

he government says it believes that with higher subsidies, the utilization of biofuel next year will increase significantly.

The bioenergy director at the Energy and Mineral Resources Ministry’s Directorate General for New, Renewable Energy and Energy Conservation, Maritje Hutapea, said on Friday that the new subsidies could cover basic production costs for bioethanol and biodiesel.

“Therefore, there will be no more reason for producers, particularly bioethanol producers, to halt production due to pricing problems,” she explained.

The government and the House of Representatives’ Commission VII overseeing energy had agreed this month to increase the subsidies for both biofuels from Rp 2,000 (22 US cents) to Rp 3,500 for bioethanol and Rp 3,000 for biodiesel. The agreement is awaiting approval from the House Budget Committee.

“With higher subsidies, we hope we can push the utilization of biofuel to reach our target,” Maritje said.

Bioethanol is produced to be mixed with the Premium, Pertamax and Pertamax Plus gasoline, while biodiesel is mixed with diesel.

According to the Energy and Mineral Resources Ministry’s data, in 2009, the absorption of biodiesel was only 119,000 kiloliters (kl) of the targeted 775,000 kl, while for bioethanol, only 1,058 kl were used out of the targeted 215,000 kl.

Last year, zero bioethanol was used, and only 223,000 kl of biodiesel was used out of the targeted 1.07 million kl.

From January to September this year, the realization of biofuel absorption had reached 25 percent of the target of 1.2 million kl.

“This year’s consumption has shown an increasing trend from last year’s figures. As of December in 2010, the realization was only 22 percent of the target. By the end of this year, the realization is estimated to reach 30 percent,” Maritje said.

The government has set the biofuel absorption target in 2012 at 886,000 kl assuming that next year there will be a limitation in subsidized fuel distribution, comprising 232,000 kl of bioethanol and 654,000 kl of biodiesel.

A 2008 ministerial decree on the provision, utilization and sales of biofuel stipulates that starting in 2010, the minimum biodiesel mix would be 2.5 percent for subsidized diesel fuel and 3 percent in non-subsidized diesel fuel. Those percentages will be raised to 5 percent and 7 percent in 2015, 10 percent and 10 percent in 2020 and 20 percent for both subsidized and non-subsidized diesel in 2025.

For bioethanol, the mandatory mixture starting 2010 is 3 percent for subsidized Premium and 7 percent for non-subsidized Pertamax and Pertamax Plus, 5 percent and 10 percent in 2015, 10 percent and 12 percent in 2020 and 15 percent and 15 percent in 2025.

The regulation also says that biofuel producers that do not follow the mandatory production targets can be sanctions.

Producers falling short of the target would face sanctions ranging from written warnings to the revocation of their business licenses.

Martije declined to comment on whether the sanctions had been implemented or not.

She said that the directorate general was currently preparing the revision of the 2008 ministerial decree to boost the utilization of biofuel.