Subsidy for biodiesel, bioethanol to be increased

The Ministry of Energy and Mineral Resources (MEMR) plans to increase the subsidy for biodiesel and bioethanol to help producers maintain their productivity and meet the government?s mandatory mixed-fuel target, reports said Tuesday.

The bigger subsidy bill is needed because producers are experiencing high production costs while the benchmark price is declining as a consequence of the declining oil price, according to the ministry?s Director General for Renewable Energy, Rida Mulyana, as quoted by The Jakarta Post.

In a proposal submitted to the House of Representatives, the ministry has proposed that the subsidy for biodiesel be set at Rp 5,000 (US$0.39) per liter, an almost triple increase compared to Rp 1,500 per liter proposed in the state budget earlier. Meanwhile, the bioethanol subsidy has been proposed at Rp 3,000 per liter compared to the previously proposed Rp 2,000 per liter, the paper said.

?The subsidy is set based on the assumptions of, among other things, the rupiah exchange rate and the crude price," Rida said.

In the proposed revised state budget, the rupiah exchange rate is set at Rp 12,500 per US dollar while the oil price assumption is $60 per barrel.

The government is proposing that 3.41 million kiloliters of biodiesel be mixed in diesel and 0.117 million kiloliters bioethanol, which would total Rp 17.4 trillion in subsidies. That is a significant increase from the Rp 3.09 trillion previously planned for 1.58 million kiloliters of biodiesel.

?The Rp 17.4 trillion is standby money and the realization will depend on the realization of blended volume,? Rida said.

The proposal is pending approval by the House. (*)