Indonesia looks at policy revamp to keep biodiesel program alive – Successful Farming

* Policy adjustments required to sustain biodiesel subsidies

* Biodiesel program may see $865 mln deficit in
2021-economist

* Price gap between crude palm oil and diesel widened in
2020

By Bernadette Christina and Fathin Ungku

JAKARTA/ SINGAPORE, Dec 2 (Reuters) – Indonesia must make
policy changes to ensure it can keep subsidising its ambitious
biodiesel program, the head of a government agency in charge of
collecting and managing palm oil export levies, told a virtual
conference on Wednesday.

The world’s biggest producer of palm oil makes it mandatory
for diesel to be blended with 30% bio content (B30), but plans
to increase this to 40% have been delayed due to funding issues.

“The price gap between crude palm oil and diesel widened in
2020, posing a challenge to the sustainability of the support
program.. especially the mandatory biodiesel program,” Eddy
Abdurrachman, president director of the Estate Crop Fund Agency
(BPDP), told the Indonesian Palm Oil Conference.

It was projected that in 2021 there would be a significant
increase in funds needed, Eddy said, estimating that Indonesia
will consume 9.59 million kilolitres of biodiesel next year.

Indonesia’s biofuel program aims to maximise domestic use of
palm oil and cut imports of oil, but a slump in crude prices
this year has made it less economical.

“Policy adjustments are required,” Eddy said.

Paulus Tjakrawan of the Indonesian Biofuel Producer
Association told the conference that the price gap between the
bio component in biodiesel, fatty acid methyl esters (FAME) made
from palm oil, and diesel rose to around $400 per tonne in 2020
from around $100 last year.

WEIGHING OPTIONS

Indonesia needed to either increase palm levies, impose an
excise tax on fuel or make palm companies contribute to
subsidies to sustain the program, Bustanul Ariffin, an economist
at the Institute for Development of Economics and Finance, told
the conference, adding the progam may suffer a 12.2 trillion
rupiah ($865.25 million) deficit next year.

Since June this year, Indonesia has collected a maximum $55
levy per tonne on palm oil exports, regardless of the price.

Indonesia’s chief economic minister, Airlangga Hartarto,
told Reuters in September there were plans to revise its palm
oil export levy rules to allow higher collection when prices
increase, but no regulation has been issued yet.

Energy ministry official Dadan Kusdiana told the conference
Indonesia’s 2020 biodiesel consumption was equivalent to 165,250
barrels of oil per day and saved the country $3.09 bln in
foreign exchange and 25.6 million tonnes of carbon.

Although biodiesel promises lower emissions, land clearance
to grow palm oil has raised concern about deforestation.
($1 = 14,100.0000 rupiah)
(Editing by Ed Davies)

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