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Indonesia to enact mandatory B35 biodiesel program as global CPO prices fall
The government is enacting the nationwide B35 biodiesel program by the end of July as an effort to boost the domestic use of palm oil to help raise CPO prices.
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Attendants serve customers at a Pertamina gas station offering biodiesel in Bintuni, West Papua, in this file photo from 2019. (JP/Jerry Adiguna)
T
he Energy and Mineral Resources Ministry is to start implementing the mandatory 35 percent biodiesel (B35) program for all biofuels by the end of July amid the global decline in crude palm oil (CPO) prices.
Dadan Kusdiana, the ministry’s renewables director general, explained that the B35 biodiesel program was part of the government's efforts to boost the domestic use of palm oil to help raise CPO prices.
Read also: B40 biodiesel plan delayed again on high CPO prices
Increased demand would lead to higher prices, Dadan said on Thursday. “This is to help raise the prices of fresh fruit bunch [FFB], which are currently falling. This is a national policy, not just the energy ministry’s policy.”
He also said ministry would not be testing the B35 biodiesel on the road.
Higher global production of vegetable oils is expected to drive down average CPO prices from US$1,500 per ton in the first half of the year to below $1,000 per ton in the second half, according to a Fitch Ratings report released in June.
CPO prices have dropped by more than $300 per ton since early June, following the government’s policy shift to encourage exports by cutting levies on the commodity.
Read also: Govt approves 1 million tons of CPO for export
“Issues concerning FFB prices cannot be [disclosed] at the present time, because we also have to consider developments,” Coordinating Maritime Affairs and Investment Luhut Binsar Pandjaitan said at an event hosted by the Association of Indonesian Palm Oil Producing Regencies (AKPSI), referring to upstream shipping problems.
Indonesia, which contributes around 60 percent to the global palm oil supply, launched a program this week to ship at least 1 million tons of CPO and derivative products by the end of the month.
But red tape has hampered the program. In an attempt to meet the export target, the government has allowed companies that are not part of the domestic market obligation (DMO) to export the commodity, provided they paid an additional $200 per ton on top of the export tax and other relevant fees.
It has also cut the maximum levy on CPO exports from $575 to $488 per ton in a bid to free up FFB stockpiles and encourage refiners to start purchasing from farmers again.
