Indonesia revises palm crop fund rules to back biodiesel drive

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JAKARTA (Aug 21): Indonesia made public on Tuesday a revised regulation that gives the country's palm crop fund more leeway to support the expanded use of biodiesel in Southeast Asia's largest economy.

Indonesia announced plans this month to require all diesel fuel used in the country to contain a 20% bio-component from September. The move aims to reduce diesel fuel imports, boost palm oil consumption and support the rupiah currency.

The revised regulation for the Estate Crop Fund, signed by President Joko Widodo on Aug 15 and made public on Tuesday, widens the fund's ability to subsidise the price gap between biodiesel and petroleum-based diesel fuel.

The current retail price of diesel is 5,150 rupiah (US$0.3526) per litre compared to 7,600 rupiah for unblended biodiesel.

Previously, the fund was limited to providing subsidies to Public Service Obligation (PSO) sectors, such as certain types of transport and power stations.

A government official said this month biodiesel producers would receive incentives to ensure uniform pricing for PSO and non-PSO sectors.

Dono Boestami, head of the Estate Crop Fund, told reporters on Monday the agency is prepared to provide incentives to support the biodiesel plan.

The Estate Crop Fund collects levies from palm oil exporters and the proceeds are used to finance government palm oil programmes such as biodiesel and crop replanting.

Boestami said the agency collected 14.2 trillion rupiah (US$972 million) in levies last year, and provided subsidies on 2.3 million kilolitres of biodiesel.

In the first quarter of 2018, the fund collected 6.4 trillion rupiah in fees and subsidised 1.1 million kilolitres of biodiesel.

Indonesia currently imports around 400,000 barrels per day of crude oil and a roughly similar amount of refined products, which makes the economy vulnerable to the increases in global crude prices that have occurred since last year.

With the country's current account deficit estimated to grow by US$8 billion in 2018, the plan is to cut diesel imports by mandating that all diesel consumers, including power plants and railways, use biodiesel that contains 20% bio-content (B20), typically palm oil.

Officials estimate biodiesel consumption will rise to between 5.5 million to 6 million kilolitres in 2019, from 4 million kilolitres this year, and save Indonesia around US$6 billion per year.

"Palm oil oversupply will be absorbed through biodiesel programme because at the moment (biodiesel) production utilization is only 30% of annual installed capacity," Boestami said.

Separately, Indonesia's energy ministry planned to issue its regulation and guidance regarding the blending and biodiesel supply quota allocations later this week, Rida Mulyana, a senior ministry official, told Reuters on Tuesday.

(US$1 = 14,605 rupiah)