REPUBLIKA.CO.ID, JAKARTA -- The government is framing a regulation on the mandatory use of the 15 percent biodiesel mix of diesel oil, a senior minister said.
"We just held a technical meeting to formulate a government regulation that will serve as the basis for the collection of funds and the mandatory use of the 15 percent biodiesel mix," Chief Economic Minister Sofyan Djalil stated here on Saturday.
He added that the framing of the regulation had been initiated because the stock of crude palm oil (CPO), the raw material used for the production of biodiesel, was in excess.
If follow-up measures are not taken, it is feared that the price of CPO, which is about US$590 per ton currently, will drop, he explained.
According to the minister, the 15 percent biodiesel mix will absorb some 4.5 million tons of CPO.
Therefore, the government's decision is expected to encourage the production of alternative sources of energy, result in a healthier environment and prevent the price of CPO from falling due to oversupply.
"By using biodiesel, we hope to achieve several objectives, including a healthier environment, energy diversification, reduction of diesel oil imports, and increase in the prices of farmers' oil palm fruit," he pointed out.
The Indonesian government has raised its biofuel mix of diesel fuel oil from 10 percent to 15 percent in an effort to save US$2.54 billion per annum on fossil fuel imports.
The mandatory 15 percent biodiesel mix policy will be implemented by the Ministry of Energy and Mineral Resources (ESDM) from April 1, as part of efforts to support the government's macroeconomic policy.
Energy and Mineral Resources Minister Sudirman Said stated that the policy will have broad implications, such as the absorption of 5.3 million kiloliters of biodiesel, which is some 4.8 million tons of the country's CPO production, and the retrenchment of US$2.54 billion of foreign exchange from fossil fuel import cuts.
The government's effort to raise the percentage of biodiesel use, which previously stood at 10 percent, will reduce oil and gas imports and help to improve the performance of the country's trade balance, the minister said.
"We will reduce oil imports because we will replace it with domestically-produced biofuel. We will soon hold a dialog with biofuel producers to make preparations." he affirmed.
He added that the higher percentage of biofuel use in fuel oil will increase the use of CPO by up to 3.5 million kiloliters and help the continuation of the downstream palm oil industry.
"This means that there will be additional demand for other food items because part of the crude palm oil will be used for biofuel," Said explained.
Indonesia's CPO production is predicted to increase to 33 million tons in 2015. Besides having the potential to raise the world price of CPO---as Indonesia is the world's largest CPO supplier---the policy will also increase the country's income from CPO exports.
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