House Rejects Demand to Raise Biofuel Subsidies
The House of Representatives on Monday rejected a government proposal to raise subsidies for the development of biofuels from an initial plan of Rp 774.47 billion ($66.6 million) to Rp 831.42 billion, arguing that it was irrational.
Evita Legowo, director general of oil and gas at the Ministry of Energy and Mineral Resources, proposed an additional
Rp 56.95 billion to support biofuel development. “The additional subsidy is needed not only to save the industry, but also to save the mandatory fuel-blend policy,” Evita said at a hearing with the House’s Commission VII.
Under a mandatory scheme that started in October, there must be at least 1 percent biofuel in the fossil-fuel blends that Pertamina sells at the pump, 2.5 percent in fuel for industrial use and 0.25 percent in fuel used by state-owned electricity utility PT Perusahaan Listrik Negara.
The government now subsidizes Pertamina’s sales of premium, diesel and kerosene fuel according to the Mean of Platts Singapore benchmark oil price. But benchmark biofuel prices in Southeast Asia have risen an average of 10 percent per liter since November, making biofuel producers less inclined to supply Pertamina with the biofuel it needs to make the blends, unless the state firm is willing to pay more.
“Rp 1,000 a liter is the maximum subsidy [the government can pay to biofuel producers through Pertamina] if the price of biofuel is higher than Pertamina’s oil price,” Evita said.
In January, the government proposed increasing the biofuel subsidy by Rp 1,000, in line with a projected increase in biofuel consumption this year.
In the revised 2009 budget, the government projects premium gasoline consumption to reach 20.6 million kiloliters and diesel consumption to hit 12.5 million kiloliters.
Bioethanol consumption, meanwhile, is expected to hit 206,389 kiloliters and biodiesel consumption is expected to rise to 625,038 kiloliters, bringing biofuel subsidies to Rp 831.4 billion.
Without biofuel subsidies, the biofuel industry loses an average of Rp 610 a liter on it sales of biodiesel and bioethanol to Pertamina, said the Indonesian Biofuel Producers Association, or Aprobi.
“Due to these potential losses, some biofuel producers have cut their supplies to Pertamina by
90 percent,” Evita said.
Lawmakers objected to the proposal to subsidize biofuel production because they said it would distort the fuel subsidy budget of Rp 105.5 trillion this year.
“Fuel subsidies should be given to the poor people, not to big biofuel companies,” said legislator Effendy Simbolon.
Evita Legowo, director general of oil and gas at the Ministry of Energy and Mineral Resources, proposed an additional
Rp 56.95 billion to support biofuel development. “The additional subsidy is needed not only to save the industry, but also to save the mandatory fuel-blend policy,” Evita said at a hearing with the House’s Commission VII.
Under a mandatory scheme that started in October, there must be at least 1 percent biofuel in the fossil-fuel blends that Pertamina sells at the pump, 2.5 percent in fuel for industrial use and 0.25 percent in fuel used by state-owned electricity utility PT Perusahaan Listrik Negara.
The government now subsidizes Pertamina’s sales of premium, diesel and kerosene fuel according to the Mean of Platts Singapore benchmark oil price. But benchmark biofuel prices in Southeast Asia have risen an average of 10 percent per liter since November, making biofuel producers less inclined to supply Pertamina with the biofuel it needs to make the blends, unless the state firm is willing to pay more.
“Rp 1,000 a liter is the maximum subsidy [the government can pay to biofuel producers through Pertamina] if the price of biofuel is higher than Pertamina’s oil price,” Evita said.
In January, the government proposed increasing the biofuel subsidy by Rp 1,000, in line with a projected increase in biofuel consumption this year.
In the revised 2009 budget, the government projects premium gasoline consumption to reach 20.6 million kiloliters and diesel consumption to hit 12.5 million kiloliters.
Bioethanol consumption, meanwhile, is expected to hit 206,389 kiloliters and biodiesel consumption is expected to rise to 625,038 kiloliters, bringing biofuel subsidies to Rp 831.4 billion.
Without biofuel subsidies, the biofuel industry loses an average of Rp 610 a liter on it sales of biodiesel and bioethanol to Pertamina, said the Indonesian Biofuel Producers Association, or Aprobi.
“Due to these potential losses, some biofuel producers have cut their supplies to Pertamina by
90 percent,” Evita said.
Lawmakers objected to the proposal to subsidize biofuel production because they said it would distort the fuel subsidy budget of Rp 105.5 trillion this year.
“Fuel subsidies should be given to the poor people, not to big biofuel companies,” said legislator Effendy Simbolon.