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The Finance Ministry is preparing a package of incentives to
support the government's ambitious program to produce 200,000 barrels
of biofuel a day by 2010, a senior official says.
Unggul Priyanto, the director for energy resources development at the
Agency for the Assessment and Application of Technology (BPPT), said
Thursday in Jakarta that the Finance Ministry was in the process of
formulating two types of incentives to be offered to investors involved
in biofuel projects.
The planned incentives, he said, consisted of tax breaks and subsidies
on loan interest.
According to the proposal, the tax breaks will be given during the
first years of operation of companies involved both in feed-stock
production and in biofuel production, while the interest subsidies
would be provided so as to ensure that investors would not have to pay
loan interest of more than 10 percent a year.
"We hope we can attract more investors with these kinds of incentives,"
Unggul told The Jakarta Post on the sidelines of a seminar on renewable
energy at BPPT headquarters.
Against a backdrop of declining oil production, Indonesia is going all
out to attract both domestic and foreign investment to develop
alternative energy sources.
In January, the government signed 58 agreements worth US$12.4 billion
with 59 foreign and local energy firms for the development of oil palm
plantations and processing facilities.
Among the investors are China's major energy firm, CNOOC, which plans
to invest a total of $5.5 billion in partnership with a local company,
Sinar Mas Agro Resources. Meanwhile, Malaysia-based Genting Biofuels
Asia plans an investment of up to $3 billion on similar project.
The chairman of the government's biofuel development committee, Alhilal
Hamdi, has said that Indonesia is hoping to produce about 200,000
barrels of oil equivalent in biofuel per day by 2010.
In order to achieve this target, the government has set aside Rp 1
trillion to cover the cost of interest subsidies on agriculture-related
loans, and the cost of procuring seedlings, while another Rp 10
trillion has been earmarked for improving agricultural infrastructure.
Some 6.5 million hectares of uncultivated land have been designated for
the development of biofuel-feedstock plantations. Based on the program,
the government hopes that locally produced biofuel will be able to
replace 10 percent of the country's total oil-based fuel needs, which
last year reached 70 million kiloliters.
In its blueprint, the government is aiming for biofuel utilization
accounting to 2 percent of total energy use, or the equivalent of about
5.29 million kiloliters (kl) of oil, between 2005 and 2010, increasing
to 3 percent, amounting to 9.84 million kl between, 2011 and 2015, and
5 percent, amounting to 22.26 million kl, between 2016 and 2025.
The biofuel development program covers the promotion of biodiesel,
bioethanol, biokerosene and pure plant oil (PPO).
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