The government proposes to the House of Representatives to allocate Rp 1.55 trillion (US$150.52 million) for biofuel subsidies in 2010, but lawmakers are concerned the needed regulation is not finished.
The director general for oil and gas at the Energy and Mineral Resources Ministry Evita H. Legowo told lawmakers Wednesday that the government proposed to double the subsidy up to Rp 2,000 (19.37 US cents) for every liter of subsidized fuel mixed with biofuel, up from Rp 1,000 a liter previously. “We propose a higher subsidy because of the increasing trends in the international crude prices,” Evita said.
The subsidies will be given to state oil and gas company PT Pertamina, the sole distributor of subsidized fuels, to help the company to purchase biofuel from the producers, whilst continuing distribution of the subsidized mixed fuels at subsidized prices.
Pertamina will only receive subsidies for bioethanol mixed in subsidized Premium gasoline, and biodiesel mixed in subsidized diesel, when the market prices of the biofuels are higher than the prices of the two subsidized fuels.
The government has mandated the fuel distribution industry and users to gradually increase the ratio of biofuel to be mixed with conventional fossil-based fuels.
For next year, the government has set targets to mix at least 1 percent bioethanol in subsidized Premium fuel and at least 5 percent biodiesel in subsidized diesel fuel.
Evita said the government estimated that next year the country would need 214,541 kiloliters of subsidized bioethanol and 562,534 kiloliters of subsidized biodiesel.
“Based on these estimates, the government proposes Rp 429.08 billion in subsidies for bioethanol and Rp 1.125 trillion in subsidies for biodiesel. The total subsidies we are proposing will reach up to Rp 1.554 trillion,” Evita said.
Lawmakers urged the government to provide explanations as to how it could reach the figure of Rp 1.554 trillion, because in an earlier hearing with the Indonesian Biofuel Producers’ Association (Aprobi), lawmakers were told that the estimates subsidy for biofuel next year was only Rp 1.25 trillion.
Lawmakers also urged the government to immediately complete the revision of presidential regulation No. 71/2005. The regulation sets out the rules on the categories of fuels to be subsidized.
The regulation is currently under revision, so as to include biofuels within the legal requirements.
“We must make a decision about this biofuel subsidy next week.
The government must finish the revision before that time, otherwise biofuels will be excluded from [the] subsidized fuels,” said deputy head of Commission VII, overseeing energy and mineral resources, Ahmad Farial, who chaired the meeting.
Evita said that lawmakers were fully correct in their request. “We cannot regulate the subsidy without issuing the regulation first. We expect that the revision can be signed immediately,” she said.
Because of the unfinished revision, Evita said the government had yet to pay Pertamina for biofuel subsidies this year.
The government and Commission VII have agreed to allocate Rp 831.43 billion in subsidies for biofuels this year, meaning that bioethanol and biodiesel will receive a maximum subsidy of Rp 1,000 per liter for mixed subsidized fuels when prices are higher than those of subsidized Premium gasoline and diesel.
The directorate general for oil and gas confirmed that as of April, the government was supposed to pay Pertamina as much as Rp 99.37 billion in subsidies for biofuel.
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