T

he government'€™s mandatory ruling on the mix of bio content into diesel fuel has hit a snag amid lingering pressure from low commodity prices.

The Indonesian Oil Palm Estate Fund (BPDP) director, Dadan Kusdiana, said that the realization of subsidized diesel fuel getting mixed with 20 percent bio-content reached approximately 404,000 kiloliters during the first two months of the year. The volume, he said, was only about 80 percent of the more than 500,000-kiloliter target set for the period.

'€œThe realization was low because some biofuel producers have been facing problems with their production facilities while Pertamina has similar problems with its distribution facilities in certain areas,'€ Dadan said on Tuesday.

Despite the low realization, the BPDP continues to expect to reach the target of having 3 million kiloliters of diesel contain 20 percent biofuel by the end of the year.

The mandatory biodiesel mix is part of the government'€™s policy to encourage the use of non-fossil fuels. Under the program, biofuel '€” mostly made of palm oil '€” is expected to replace diesel fuel as part of the effort to reduce the country'€™s dependency on petroleum-based fuel and its carbon emissions. The program also aims to jack up the commodity'€™s price, which has been under pressure amid a global economic slowdown.

The mandatory diesel/biofuel blend increased from 10 percent in 2013 to 15 percent in 2015 and to 20 percent this year.

'€œWe are expecting to meet the target. However, as I understand it, the realization of the mandatory blend of non-subsidized diesel fuel is very low to date,'€ Dadan said.

The Energy and Mineral Resources Ministry'€™s new-renewable energy and energy conservation agency, which supervises the implementation of the mixture policy, could not immediately be reached for comments regarding the situation.

Business players earlier complained about the burden of the ruling, particularly amid the current low commodity prices. They said the declining oil prices might widen the gap between production costs and consumer prices that must be shouldered by the government in addition to the estimated total subsidy for the program, which might reach Rp 18 trillion (US$1.37 billion) this year.

For subsidized diesel fuel, the gap is filled by levies collected by the BPDP from crude palm oil producers. The levies have been imposed since last year as part of the government'€™s attempt to develop value-added processes in the local palm oil industry and encourage biofuel producers to continue production. Similar schemes, however, do not apply for non-subsidized diesel fuel.

Figures from the Indonesian Palm Oil Producers Association showed that Indonesia'€™s CPO production, along with its derivatives, reached 32.5 million tons in 2015, an increase of 3 percent from 31.5 million tons a year earlier. Most of the commodity, about 26.4 million tons of it, was exported in 2015, as compared to 21.76 million tons in 2014.