USE OF BIOFUEL PROVES TO BE COSTLIER

By Andi Abdussalam

akarta, May 28 (ANTARA) - The mandatory use of biofuels in Indonesia to replace the country's shrinking fossil fuels is not yet running smoothly. Biofuel proves to be more expensive than fossil fuels so that biofeul use even causes inefficiency, officials say.

        The price of biofuel per liter now is Rp9,000 or double the price of premium gasoline which is Rp4,500 per liter.

        "Rp9,000 per kg is too high for the public. If the government uses this as a reference price, it should provide a subsidy," chairman of the Indonesian Biofuel Producers' Association (APROBI), Purnadi said.

        According to state-owned power utility company PLN, the use of biofuels to fire its generators was affecting the power production process and reducing its efficiency.

        "It cuts our efficiency by 0,5 percent," PLN President Director Fahmi Mochtar told a hearing with the House Commission VII for energy affairs. PLN is now under a trial use of biofuel mixture by a number of its power generators.

        It turns out that the use of biofuel creates lower calories. It is unlike pure fuels which could produce higher calories when used by generators.

        Oil observer Kurtubi admitted that the use of biofuel in Indonesia had not developed as expected. Policies of the government and private firms (upstream industries) have not yet gone in the same direction, particularly with regard to biofuel produced from crude palm oil (CPO).

        "The price of CPO is relatively high. At a time when its price is rising, producers preferred to export their products, while when the price is declining they would reduce their production," he said.

        In the face of the shrinking fossil fuels, the government must be consistent in its biofuel programs in order to reduce its dependence on the shrinking energy reserves, Kurtubi said.

        "At present the biofuel potentials have not yet been exploited maximally while the country is rich in raw materials, such as cassava, palm oil, jatropha curcas and molasses for the production biofuels," Kurtubi.

        He said Indonesia was rich in biodiversity and had vast land areas which were suitable for the development of biofuel that could turn Indonesia into an important biofuel producer in the world.

        Kurtubi said it was now time for Indonesia to diversify its energy from farm produce owing to the fact that world crude price was not showing an upward trend.

        "Biofuels have not yet developed well in the country because the government is not yet firm on its farm produce regulation. The policy to boost the development of biofuels is not yet consistent," he said.

        Therefore, according to Purnadi, the political will of the government is needed. "The main problem so far is that the price of biofuels, believed to be environment friendly, is too high. It therefore needs the government's political will to reduce it," Purnadi said. He said all over the country the price of biofuel is higher than that of fossil fuels.

        "Other countries have political will in developing their biofuels. They provide for example tax compensation and so forth," the APROBI chairman said adding that his organization has set itself a target of producing 214,541 kiloliters of bioethanol in 2010. This year the country's bioethanol production capacity reached 93,000 kiloliters.

        Virtually the government at present is submitting to the House of Representatives (DPR) a budget allocation amounting to Rp1.554 trillion in biofuel subsidy in the 2010.

        Director General for oil and gas Affairs Evita Legowo told a hearing with House Commission VII for energy affairs that the subsidy allocation consisted of Rp429 billion for bioethanol and Rp1.125 trillion for biodiesel.

        "The volume of the biofuel (BBN) which would be subsidized in the 2010 state budget consisted of 214,541 kiloliters bioethanol and 562,534 kiloliters biodiesel," the director general said.

        However, the House of Representatives has delayed deliberating the proposed subsidy budget for biofuel until after a presidential decree regulating subsidies for fuel oils had been revised.

        "How can we deliberate a proposed biofuel subsidy if it has no legal basis," Commission VII member Alvin Lie said during a meeting with PLN president director on Wednesday.

        He said that the presidential decree which regulated the procurement and distribution of certain fuel oils should first be revised to include biofuel before the House could discuss the government's proposal for a biofuel subsidy.

        The House Commission VII member was referring to Presidential Decree No.71 / 2005 on the Procurement and Distribution of certain fuel oils. The presidential decree only regulates subsides for premium gasoline, diesel oils and kerosene.

        In order to provide a subsidy for biofuels the presidential decree should be revised and include biofuels first . "There must be a political decision first with regard to the revision of the presidential decree before we could discuss figures on the subsidy," Lie of the National Mandate Party (PAN) said. ***2*** (T.A014/A/HAJM/16:30/a014) (T.A014/A/A014/A/A014) 28-05-2009 16:55:23