INDONESIA RAISES BIOFUEL USE TO REDUCE FOSSIL FUEL IMPORTS

By Andi Abdussalam

Jakarta, March 24 (Antara) - The Indonesian government has raised its biofuel mix of diesel fuel oil from 10 percent (B10) to 15 percent (B15) in an effort to save US$2.54 billion per annum on fossil fuel imports.          The B15 mandatory policy will be implemented by the Ministry of Mineral Resources and Energy (ESDM) from April 1, as part of efforts to support the government's macroeconomic policy.          "This is one of the fundamental changes being implemented in the energy sector. The composition of the energy mix has been gradually shifted from dependence on fossil fuel to new and renewable sources of energy (EBT)," ESDM Minister Sudirman Said stated here on Monday.          The minister said that the policy, which is contained in the ESDM minister's regulation number 12/2015, 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 crude palm oil (CPO) production, and the retrenchment of US$2.54 billion of foreign exchange from fossil fuel import cuts.          If successful, the biofuel mix will be increased to 20 percent (B20) in 2016, for instance, when the use of the mix is expected to reach 8 million kiloliters.          The 15 percent increase in the use of biofuel mix is part of the government's newly announced economic policy package.            The Indonesian government has issued a number of policies to improve the country's economic performance and to continue the national economic structural reform.          The  economic structural reform policy package comprises policies on tax allowance, anti-dumping import duties, visa-free facility, the use of 15 percent biofuel mix,  the application of Letter of Credits for mining companies, and the restructuring of domestic reinsurance firms.          Chief Economic Minister Sofyan Djalil had noted earlier that there were six main polices in the economic reform package, one of which deals with the fuel oil sector.      Regarding biofuel, Minister Said affirmed that the policy would save foreign exchange because it would reduce oil imports by some US$2.54 billion.          The government's effort to raise the percentage of biodiesel use, which currently stands at 10 percent, would reduce oil and gas imports and help improve the performance of the country's trade balance, he explained.          "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. A ministerial regulation to that effect will be issued in a day or two," he had said earlier.           He added that the higher percentage of biofuel use in fuel oil would increase the use of CPO by up to 4.8 million tons 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 CPO will be used for biofuel," Said noted.          Moreover, Rida Mulyana, the director general for energy conservation and new and renewable energy affairs of the ESDM, is optimistic that ample amount of CPO will be available to serve as raw material for the production of biodiesel oil.          In 2014, Indonesia's CPO production stood at 31 million tons, of which 30 percent was consumed domestically.          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.          "This program will also provide new jobs for about 300 thousand workers and reduce eight million CO2 emissions," Mulyana added.          Furthermore, Deputy Chairman of Commission XI, which oversees financial affairs, of the House of Representatives (DPR), Gus Irawan Pasaribu, also opined that the government's policy to raise the use of biofuel to 15 percent could reduce imports from the fuel oil sector.          The oil and gas sector of the country still feels import pressures in the trade balance, Pasaribu, who is also a legislator of the Great Indonesia Movement Party (Gerindra), said.          "However, there is a need to question whether the policy of former president Susilo Bambang Yudhoyono will be continued. One of his policies on biofuel was aimed at empowering or revitalizing (oil palm) plantations. This policy had better be continued," Pasaribu remarked.       The legislator added that the strategy will need an increase in the biofuel production. So the government is also expected to ensure that the country's biofuel industries that need raw materials from CPO are ready.          "Owners, particularly small ones, of oil palm plantations that produce CPO also need protection from the government. It should think about their production facilities to enable their output to increase, as well," he suggested.          Pasaribu is confident that the use of a higher rate of biofuel will save on foreign exchange because it will reduce imports, which will eventually have impacts on the country's trade balance and current account.          Therefore, the deputy chairman of commission XI believes that the government's economic policy package, which includes the policy on biofuel, will be effective in accelerating the government's economic structural reform.          "It will, among other factors, have an impact on the decline in the country's current account deficit to below 3 percent of the gross domestic product in 2015," he affirmed.          He also pointed out that the impact could be created as some of the policies are based on objectives to encourage export-oriented industrial development.     ***3*** (T.A014/INE) EDITED BY INE (T.A014/A/BESSR/A. Abdussalam) 24-03-2015 20:17:2