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The government is considering offering financial incentives
so as to encourage gas stations to stock biofuel blends, says an
official.
Evita H. Legowo, an assistant to the energy and mineral resources
minister, told The Jakarta Post on Monday that the incentives, which
could take the form of tax relief or subventions, were necessary to
ensure that biofuel retailers could continue to operate profitably.
"It is important to provide incentives because if oil prices fall below
US$70 per barrel, the market prices of biofuels will be higher than the
prices of pure hydrocarbon-based fuels," Evita explained.
She added that the government was in the process of formulating a
mechanism for providing the proposed incentives so as to ensure that
retailers would be interested in stocking biofuels.
Evita, who is also the first secretary of the National Biofuel
Development Committee, said that the committee had proposed to the
President that a subvention mechanism might be the best way forward to
encourage retailers to stock biofuels.
"Sales of biofuels could be subsidized, like the premium gasoline sold
by Pertamina," she said.
Evita also said that the government should consider adopting the
methods employed by developed countries in promoting the sale of
biofuels, such as imposing additional taxes on conventional fuels.
"Germany, one of the world's biggest biodiesel producers, has imposed a
tax on fossil fuels. It might be worth our while to see how they do
things over there," she said.
She added that the government could also consider the Philippine and
Thai approaches, where it was mandatory for fuel retailers to also
stock biofuel.
"However, before we would be able to introduce such a system, where
retailers are required to sell biofuel blends, the government would
firstly have to create enabling circumstances by providing financial
incentives," Evita stressed.
She pointed out that state oil and gas firm Pertamina, which is
currently the only biofuel distributor in the country, was finding it
difficult to boost biofuel sales because of their higher prices.
Under the government's biofuel promotion plan, Indonesia will increase
its usage of biofuels to 5.29 million kiloliters by 2010 and 9.84
million kiloliters by 2015.
Pertamina currently sells Biodiesel-5, a blend of 95 percent
hydrocarbon-based fuel and 5 percent biodiesel, in Jakarta and
Surabaya, and Bioethanol-5, a mix of 95 percent hydrocarbon-based
gasoline and 5 percent ethanol in Malang and Jakarta.
In addition to the proposed incentives for biofuel retailers, the
government has issued a regulation providing tax relief for investments
in biofuel production.
In January, the government signed 58 agreements worth US$12.4 billion
with 59 local and overseas energy firms for the development of oil-palm
plantations and processing facilities.
Local lenders Bank Rakyat Indonesia, Bank Mandiri, Bank Bukopin, the
West Sumatra regional development bank and the North Sumatra regional
development bank have pledged to provide loans of up to Rp 25 trillion
for the development of plantations and Rp 25 trillion for the building
of processing plants.
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