T

he government'€™s plan to blend more biodiesel into diesel fuel may fall short of target as regulatory delays have disrupted implementation.

Fuel distributors have been required to increase their biodiesel mix to 15 percent of their overall diesel fuel starting April this year, from 10 percent last year, to reduce oil imports.

But compliance has been low because biofuel supply is being disrupted by supporting regulations that are still on the way. State-owned Pertamina, which dominated the market share, has run out of stock for fatty acid methyl ester (FAME), which is the main raw material needed to produce biofuel.

'€œWe had to wait for the government regulation and the presidential regulation before we could [issue] the regulation on the new biofuel index price,'€ said Rida Mulyana, director general for new, renewable energy and energy conservation at the Energy and Mineral Resources Ministry.

He was referring to government and presidential regulations on the collection of plantation funds by imposing a levy for palm oil exporters, which were already issued this week, but a special public service agency (BLU) to collect the levy has not yet been established. Finance Minister Bambang Brodjonegoro said the BLU regulation would be issued before the end of May.

Meanwhile, the new biofuel index price (HIP) is expected to support local biodiesel producers so they will be willing to continue supplying amid a declining oil price that has made the biofuel business less profitable.

The new price formula, which is pending the Energy and Mineral Resources Ministry'€™s approval, will be based on the index price of crude palm oil (CPO), instead of oil like in the past, plus US$125 per ton for the conversion of CPO into biocontent substance and transportation costs, according to Rida.

As for the levy for palm oil exporters, the policy was aimed at securing domestic CPO supply to feed biofuel producers. The levy will also be allocated to subsidize biodiesel and improve the country'€™s oil palm plantations.

Under the plan, exporters of CPO and its products will be imposed levies of $50 and $30 per ton, respectively, if the commodity'€™s price stands below $750 per ton like at present. Otherwise, the government will impose an export tax of between 7.5 and 22.5 percent.

About 2.5 million kiloliters (kl) of FAME, which is made out of palm oil, are expected to be blended into diesel fuel this year '€” comprising 1.4 million kl to be mixed into subsidized diesel fuel and the remainder for the non-subsidized one, according to Energy and Mineral Resources Ministry spokesperson Dadan Kusdiana.

'€œThose are assumptions if the mandatory blending of 15 percent biodiesel fuel takes effect in June,'€ Dadan said.

But until the end of March, only 140,000 kl biofuel or FAME had been mixed into diesel fuel, he added, estimating that Pertamina would blend 1.7 million kl this year with the remaining 800,000 kl from other fuel distributors.

The government began implementing the mandatory mix of 10 percent of biodiesel into diesel fuel in 2013 as part of its attempts to cut the country'€™s growing consumption of fossil fuels.

However, infrastructure issues have hampered the government in reaching its target. In 2014, only 1.69 million kl of biodiesel were blended out of a total target of 3.41 million kl. Of the blended figure, 1.17 million kl was mixed with subsidized diesel fuel, also a lower achievement than a target of 1.57 million kl.

Grace D. Amianti contributed to this story.