Govt prepares three incentive schemes for biofuel

Government has prepared three schemes regarding incentives given to investors engaged in producing biofuel (BBN), Investor Daily reported Wednesday.

To date, at least 15 companies ? both foreign and national ? have built biofuel plants across the country. ?The government is also building eight biodiesel plants, ?said Alhilal Hamdi, who chairs the National Biofuel Development Team, during a dialog with members of the Indonesian Chamber of Commerce and Industry (Kadin) in Jakarta on Tuesday.

The dialog with theme ?Socialization of the Biofuel Application Program? was also attended by Minister of Industry Fahmi Idris and Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

Alhilal said further that the government has prepared several incentives for activities that support the development of biofuel. Biofuel-related development activities that will deserve to receive an incentive are research, new investment and trade.

As far as the research is concerned, it is proposed that the companies that are conducting a research (on biofuel) will be entitled to an income tax free facility.

The Biodiesel Development Team and Kadin have proposed that the new investors should be given a tax holiday and tax allowance to attract investors. The government has also promised to provide uncomplicated licensing procedures.

?As for trade, there was a suggestion that there should be a tax reduction minimum on par with the present export tax. For example, the tax on crude palm oil will be 1.5 percent,? Alhilal said.

Alhilal made it clear that the government will not give price incentives. Biofuel price will be left to the market or it will be determined by market players like Pertamina, Petronas and Shell.

Itochu of Japan, one of the foreign investors interested in biofuel business, plans to produce cassava-based biofuel in Lampung, Sumatra, with expected production of 120 kilo liters per day. ?The biofuel plant with an investment of US$25 million is expected to start production in 2007,? said Alhilal.

Meanwhile, Minister of Industry Fahmi Idris said that the construction of the eight plants is expected to complete in May 2007. (*)