T

he Indonesian Oil Palm Estate Fund (BPDP) is preparing to disburse a crude palm oil (CPO) fund to give incentives to the domestic biodiesel industry and replant aging oil palms, as it has collected more than Rp 1 trillion (US$70.7 million) to date.

The disbursement is approaching after state oil and gas firm Pertamina bought around 10,000 kiloliters (KL) of biodiesel from palm oil companies as of Aug. 31 for its new subsidized diesel B15, which has a mandatory 15 percent palm oil content to reduce fuel imports.

BPDP president director Bayu Krisnamurthi said that the BPDP would pay a subsidy of Rp 2,700 per liter of biodiesel from the fund.

'€œThe funds we have collected are enough to fund the gap between the price in MOPS [Mean of Platts Singapore] and the biodiesel,'€ Bayu said on Friday.

The CPO volume secured by Pertamina is part of the contract between the firm and petroleum and chemical distributor AKR Corporindo with palm oil producers to buy 339,000 KL of CPO from Aug. 17 to Oct. 31.

For the rest of the year, the contract is targeted to secure 426,000 KL of CPO.

Meanwhile, another BPDP executive, fund distribution director Dadan Kusdiana, said that the BPDP had collected more than Rp 1 trillion to date, which would partially be used for the subsidy. The body aimed to garner Rp 4.5 trillion this year.

'€œMaybe we will spend Rp 26 billion to Rp 27 billion for August for the biodiesel [from CPO funds],'€ Dadan said, adding that they would disburse it after the biodiesel distribution had been verified by the Energy and Mineral Resources Ministry.

The body, which was set up as a public service agency under the Finance Ministry, has been collecting levies from exporters since July, with an aim to develop the palm oil industry.

The levies amount to $30 per metric ton for processed palm oil and $50 per metric ton for CPO, as long as the CPO price falls under the government reference price of $750 per ton.

The set up of the BPDP was also a response to the fall in the commodity'€™s price in the global market which has affected Indonesia as the largest producer of palm oil.

Palm oil futures in Kuala Lumpur have fallen 18 percent in the past year due to the fall in the crude oil price and weakening demand from China and India. It stood at 2,032 ringgit ($471.4) as of Sept. 3 according to the Malaysian Palm Oil Council (MPOC).

Meanwhile, Indonesia, which produced around 30 million tons of palm oil last year, still saw an oversupply of palm oil, Bayu said.

The BPDP targeted Pertamina to buy around 700,000 KL of CPO from the subsidy mechanism, while the nonsubsidy target for this year also stood at a similar figure, totaling almost 1.5 million KL.

The target will rise to 2.5 million KL for CPO with the subsidy mechanism next year, and the same figure for CPO from a nonsubsidy mechanism, totaling around 5 million KL.

Funding the biodiesel subsidy would still be a big part of the CPO funds, Bayu said, even though the body would also continue to fund revitalization and research and development.

The BPDP is ready to fund replanting of around 15,000 hectares of palm oil this year, he added. The body is currently following up two proposals to replant a total of 600 ha of palm oil by farmers in Riau.

'€œThe replanting cost for each hectare will be around Rp 40 million to Rp 50 million,'€ Bayu said.

He added that the body aimed to replant 100,000 hectares next year.

Dadan, meanwhile, added that the fund would likely be given as a grant and the BPDP would only supervise it until the replanting process was complete.

The BPDP would also work together with the Agriculture Ministry for regulations on replanting, he said.

'€œWe will focus in Riau, Jambi and Bengkulu, because the palms there are aging. The areas could be the priority,'€ he said. (fsu)