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enior Indonesian government officials will meet with a visiting European Union (EU) delegation this week to respond to allegations that the government subsidized biodiesel exported to the EU.

Trade Ministry trade safeguard committee director Ernawati said in Jakarta on Friday that the government was ready to clarify the allegations and was confident that the case could be resolved bilaterally.

Ernawati said that the response would be formally submitted during a meeting with the EU delegation.

The visitors have been slated to meet officials from the Trade Ministry, the Energy and Mineral Resources Ministry (ESDM), the Industry Ministry and the Agriculture Ministry in Jakarta as part of an EU investigation into the alleged illegal subsidies.

An investigation initiated by the European Commission in November said that Indonesia had illegally subsidized its biodiesel producers.

The EU has accused the Indonesian government of imposing low export taxes on biofuel exports, making local biofuel products cheaper than those produced in the EU.

It was also alleged that the government provided local producers a subsidy of between Rp 2,000 (21 US cents) and Rp 3,000 per liter for domestic biodiesel.

Ernawati told reporters that there was a big hole in the EU'€™s argument, claiming that low export taxes for biodiesel were part of a government strategy to boost the downstream industry, which no way aided local biodiesel producers.

'€œWe impose different tariffs on various products. We impose higher export tariffs for raw materials and lower tariffs for processed products. We want to boost downstream products,'€ Ernawati added.

The government subsidy, according to Ernawati, was actually only Rp 1,000 per liter and was given to boost domestic consumption of the eco-friendly fuel. She claimed that the subsidy did not affect the price of Indonesian biodiesel in the international market and that the subsidy had been given only when biodiesel prices were higher than that of regular diesel fuel.

Biofuel Producers Association (Aprobi) representative Paulus Tjakrawan said that the industry did not gain any advantage from the subsidy, claiming that there was no connection between the subsidy and the international price of Indonesian biodiesel.

Paulus said that Indonesian producers sold biodiesel according to monthly reference export prices set by the government that were based on the average international price in the previous month.

'€œWe are not beneficiaries, we are even suffering. The production cost is not cheap and our sales are currently decreasing,'€ Paulus added.

According to the Trade Ministry, Indonesia exported 1.5 million tons of biodiesel in 2012 and 196,000 tons between January and April 18 this year, showing a downward trend.

Indonesia'€™s biodiesel exports have surged in recent years, while the EU remained the largest market for the product. According to Eurostat, Indonesian biodiesel exports to the EU were 500,000 tons in 2010 and 1.5 million tons in 2012.

In addition to the biodiesel subsidy allegations, EU has accused Indonesia and Argentina of dumping their biodiesel in the EU market by selling it at lower prices than available locally.

The EU said last week that it would register more imports of biodiesel from Argentina and Indonesia, making it more likely that the bloc would impose duties on the two nations in the coming months.

Indonesia and Argentina supply 90 percent of the EU'€™s biodiesel imports, and face the prospect of retroactive duties if the investigation finds that the nations have benefited from illegal subsidies.

The EU has already registering biodiesel from some companies in the two nations as part of a separate case on dumping. (koi)