Tue, 25 Jul 2006
Govt allocates big chunk of land for biofuel projects

Rendi Akhmad Witular, The Jakarta Post, Jakarta

As part of its commitment to boost the use of alternative energy, the government has set aside huge swathes of land across the archipelago for the crops needed for raw materials for producing biofuels.

The chairman of the national team for the development of biofuel, Al Hilal Hamdi, said Monday that 6.5 million hectares of idle land would be allocated for investors interested in planting biofuel crops.

They include oil palm, sugarcane, jatropha and cassava, which are all easily available across the country.

"We have allocated several areas which are suitable for planting those crops," Al Hilal said after a limited Cabinet meeting at the Presidential Palace to prepare a blueprint for developing the biofuel industry.

Of the total land allocation, some 3 million hectares will be allocated for oil palms, 1.5 million hectares for jatropha, 500,000 hectares for sugarcane and 1.5 million hectares for cassava, he added.

A concerted movement for the use of biodiesel has emerged in the wake of skyrocketing oil prices. Biofuel is renewable and based on such crops as castor-oil plants, oil palm, cassava and sugarcane.

Most importantly, biofuel production is highly labor intensive and the renewable fuel burns cleaner.

President Susilo Bambang Yudhoyono has pledged to issue several supporting regulations that will help accelerate the establishment of plantations for biofuel crops, as well as their processing plants.

The regulation and the blueprint will cover issues related to the provision of land, infrastructure, manufacturing plants, marketing and funding.

The national team for the development of biofuel will be tasked to coordinate the preparation of the industry with other government institutions and the private sector, as well as in drawing up the funding scheme.

However, many believe this essential fuel diversification cannot succeed if the biofuel industry is not included in an integrated energy development program and supported with tax incentives, subsidies and regulatory infrastructure.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said that once the blueprint was set, the government would target biofuel to account for about 10 percent of the country's energy portfolio by 2010.

"The government also expects the sector to create around 3 million jobs and cut foreign-exchange expenditure for importing fuel by US$10 billion by 2010," said Purnomo, adding that the biofuel could also be used for fueling power plants.

State oil and gas company PT Pertamina and state power company PT PLN have been appointed as standby buyers for the biofuel if demand remains low among car and motorcycle users.

The government estimates Rp 100 trillion ($10.8 billion) investment is needed in the sector within the next five years.

According to Al Hilal, the estimate was based on an assumption that on-farm investment for oil palms would cost Rp 30 million per hectare, Rp 15 million per hectare for sugarcane, Rp 3 million for jatropha and Rp 3.5 million per hectare for cassava.

The government announced earlier a crash program to build 11 biofuel plants, with production targets of 187 million liters next year and 1.3 billion liters by 2010, or equivalent to 3 percent of the country's total fuel consumption of 41 million kiloliters in 2005.

Al Hilal said several noted international and domestic investors expressed interest in the sector, with the government pledging to provide them with fiscal incentives.

He said that Indonesian tycoon Putra Sampoerna was interested in teaming up with state-owned plantation company PT Perkebunan Nusantara XI to establish a biodiesel processing plant in East Java, with investment of around $60 million.



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