JAKARTA: Indonesia has scrapped plans for a mandatory B50 grade of palm oil-based diesel this year and will stick with B40 owing to technical and funding concerns, government officials said on Wednesday.
Indonesia had planned to launch the B50 grade - a blend of 50% palm oil-based biodiesel and 50% conventional diesel - in the second half of this year. Its mandate for B40, which uses a blend of 40% palm oil-based biodiesel, will remain in place.
The biodiesel mandate in Indonesia, the world's top palm oil producer, often affects global palm oil prices as increased domestic use reduces the available exports of the versatile vegetable oil.
Benchmark palm oil prices in Malaysia pared some earlier gains after the news. The benchmark was flat as of 0738 GMT, after gaining as much as 1.33% earlier in the trading session.
Government officials met on Wednesday to discuss the biodiesel programme and its funding.
"This year, it will stay at B40," Deputy Energy and Mineral Resources Minister Yuliot Tanjung said after the meeting. "There will be an increase of diesel production from Balikpapan refinery, so B40 is sufficient."
The government is reviewing the timeline to complete trials of B50 fuels, especially for trains, heavy equipment and machinery, energy ministry official Eniya Listiani Dewi told reporters after the same meeting.
In answer to a question from reporters on whether the B50 mandate would be implemented in 2027, Chief economic minister Airlangga Hartarto said that would depend on the gap between prices of conventional diesel fuel and palm oil-based fuel.
LEVY HIKE
Indonesia subsidises its biodiesel programme by plugging the price gap between fuels made from crude oil and palm oil, using proceeds from palm oil export levies collected by the Indonesian Estate Crop Fund Agency (BPDP).
The ever expanding mix, from B15 for only a few sectors in 2015 to B40 for nearly all diesel machines today, has put pressure on BPDP's ability to subsidise the programme.
To sustain the agency, the government will raise the levy rates, Airlangga said.
Indonesia will raise crude palm oil export levies to 12.5% starting from March 1, said BPDP chief Eddy Abdurrachman. Levies for refined products will also be raised by 2.5 percentage points.
It currently collects 10% levies on crude palm oil, with the rate for more refined products ranging between 4.75% and 9.5%.
Indonesia's energy ministry has allocated 15.65 million kilolitres of palm oil-based biodiesel for this year's mandate, of which 7.45 million kilolitres will be subsidised. - Reuters
