Indonesian government hopes to boost biodiesel with new measures

The government of Indonesia have announced that the mandatory levels of palm oil-based methyl ester in biodiesel, will be increased. The move is being made in an effort to reduce the amounts of oil that are being imported into the country. Mandatory levels will be raised by 2.5 per cent, which could help to save money on fuel.

Biodiesel content in Indonesia will be changing once the government puts in place its change in the mandatory levels of methyl ester. Current rules state that 7.5 per cent of biodiesel products must be methyl ester, which is made from palm oil, but the new ruling will mean that ten per cent of biodiesels must be made up of this component.

It is hoped that the increase in methyl ester levels will help to reduce the amount of oil that is being imported into the country and therefore help to cut down on cost. In the first half of this year, Indonesian fuel imports cost a total of $5.8 billion (£3.7 billion). This huge cost has, in part, contributed toward the $9.8 billion account deficit that the Indonesian government had in the second quarter of the year.

The increase of crude palm oil-based biofuel in Indonesia could help to increase the demand for biofuel for companies, as well as for the domestic market. Currently half of the domestic diesel demand, which stands at 35 million kilolitres, is subsidised by the government, while the other half is not subsidised in any way. Biofuel producers are able to deliver around 3.5 million kiololitres of domestic fuel a year, but the demand for government subsidy is high, due to the non-economically viable price of the product.

It is hoped that the new move by the indonesian government will not be a replay of a similar programme that was implemented in 2006. Although, with the current loss in money throughout the country, it would appear that the government is more determined to succeed and to reduce its current deficit.