The world's biggest palm oil producer is aiming to make mandatory the use of a 2.5% blend of biodiesel by September this year, the chairman of the National Biodiesel Development Team said, Reuters reported.
The nation has been pushing for the use of biofuels derived from palm oil to cut the use of costly petroleum products and ensure the fledging biodiesel industry survives rising prices of the commodity.
The government is drafting two ministerial decrees which will make the use of the biodiesel blend mandatory for both the industrial and transport sectors, Alhilal Hamdi, said.
"We expect the decrees to be completed by September so that we can put the policy in place at the same month," Hamdi said.
"The biodiesel mandatory policy will guarantee a market for producers. It will help idle biodiesel plants resume operations."
State oil firm Pertamina, which has been selling biodiesel since 2006, cut the blend in its diesel fuel from an initial 5% to 2.5% and then 1% due to rising palm oil prices and the lack of a mandatory policy.
The combined capacity for biofuel using palm oil as a feed stock in Indonesia is two million kilolitres per year but it is running at 20% of its capacity, data from the biodiesel team shows.
But if the mandatory policy is introduced, biodiesel capacity will grow to five million kilolitres a year by 2010, Hamdi said.
Indonesia produced 17.18 million tons of crude palm oil in 2007 while domestic demand stood at 3.8 million tons, mostly for food.