Tue, 26 Sep 2006

Rp 13 trillion earmarked for biofuel development

Urip Hudiono, The Jakarta Post, Jakarta

The government is setting aside a total of Rp 13 trillion (US$1.4 billion) and nearly 500,000 hectares of land for the development of the country's fledgling biofuel industry next year.

The package comprises an additional Rp 12 trillion to the Rp 1 trillion allocated under the 2007 budget to subsidize the interest payments on loans taken out for biofuel-related ventures, the head of the government's biofuel development committee, Alhilal Hamdi, said during a hearing with the House commission on energy Monday.

The additional money will consist of Rp 10 trillion for the development of infrastructure -- such as irrigation systems and access roads -- in areas earmarked for biofuel plantations, said Alhilal.

The remaining Rp 2 trillion is for the procurement of seedlings.

Financial support for biofuel development also will come from the banking sector, Alhilal said, adding that the country's lenders were prepared to channel up to Rp 20 trillion in loans to the industry.

Regarding biofuel plantations, Alhilal said the government had so far secured commitments from eight private-sector firms for the planting of close to half a million hectares with oil palm and jatropha (the fruits of which can be processed into biodiesel), as well as sugarcane and cassava (both of which can be processed into ethanol).

Among the largest biofuel planters will be PT AGB, which plans to cultivate 300,000 hectares in North Maluku province, PT Wilmar Bioenergy (150,000 hectares in Riau and East Kalimantan provinces), and PT Bakrie and Rekayasa Industri (25,500 hectares in Jambi).

The government itself will plant nearly 2,000 hectares, primarily as part of pilot and research projects, including 140 hectares under the Agriculture Ministry and 650 hectares by the Research and Technology Ministry's Technology Assessment and Application Agency (BPPT).

Alhilal had previously said that 6.5 million hectares of idle land would be allocated to investors interested in planting biofuel crops.

Of that total, some 3 million hectares would be earmarked for oil palm, 1.5 million hectares for jatropha, 500,000 hectares for sugarcane and 1.5 million hectares for cassava.

Following the surge in oil prices and the resulting strain on the budget, as well as burgeoning domestic fuel consumption, the government rolled out a national alternative energy program, which includes the promotion of biofuel.

It wants to see biofuel account for 10 percent of the country's total fuel consumption, which reached 70 million kiloliters last year, by 2010.