T

he automotive industry is worried that the government'€™s policy to increase mandatory blending of biofuel into diesel could affect engines.

'€œThe usage of biodiesel is good. However, we are still worried about the impacts. There are engines that can accept 15 percent or even 20 percent [biofuel] content, however, some other engines cannot accept that,'€ Association of Indonesian Automotive Manufacturers (Gaikindo) deputy chairman Jongkie Sugiarto said.

The government last March required higher content of locally produced biofuel blending into diesel fuel, of 15 percent from 10 percent previously. It wants the figure to continue to increase up to 20 percent, compared with only 7.5 percent required in 2013.

The policy was launched to reduce carbon emission and bring down imports of diesel fuel to meet growing domestic fuel consumption. Indonesia, a former member of the Organization of Petroleum Exporting Countries (OPEC) but now a net importer of the commodity, has seen its trade balance tainted by a growing volume of imports of crude oil and its products.

Energy and Mineral Resources Ministry findings showed that usage of biofuel should be increased gradually and only slightly, or engines could be damaged, the ministry'€™s director general for new, renewable energy and energy conservation Rida Mulyana has said.

Under the 15 percent mandatory mix of biodiesel policy, which is scheduled to be effective starting this April, as many as 3.84 kiloliters of biofuel are expected to be mixed into both subsidized and non-subsidized diesel fuel, this year.

State-owned oil and gas giant PT Pertamina, which is the biggest fuel distributor in the country, admitted that it had received complaints from automotive producers that their engines would not be able to adapt to higher biocontent.

'€œThere is a recommendation from one of them that its engines can only receive 12.5 percent at the maximum level. [State-owned electricity firm] PLN is also worried about an obligation of up to 25 percent biofuel to be mixed for power plants,'€ Pertamina marketing director Ahmad Bambang said. He added that Pertamina would comply with the mandatory blending policy.

While worries emerge over the higher biofuel blending policy, the government continues its efforts to boost the biofuel industry.

On Wednesday, Coordinating Economic Minister Sofyan Djalil said that the government was finalizing a presidential regulation to levy palm-oil exports, the proceeds of which would be used to subsidize biofuel so that it could incentivize more producers and consumers.

Crude palm oil (CPO) shipments would be charged with levies of US$50 per metric ton, while processed products would be levied $30 when prices dip below $750 each ton.

'€œWe will strictly fine those [exporters] who do not comply and they will even be prohibited from exports and their licenses will be revoked,'€ he said after a coordinating meeting at his office, adding that the presidential regulation might be signed within the week.

Sofyan further said that the funds collected from the taxes would be managed by a special public service agency under the Finance Ministry, which would be set up soon.