JAKARTA (TheInsiderStories) – President Joko Widodo has signed the mandatory expansion of fuel with a mixture of 20 percent biodiesel (B20) to boost foreign exchange (FX) revenues. The new policy poured in a Presidential Regulation No. 66 of 2018 concerning the revision of the PP No. 61 of 2015 on the Collection and Use of the Palm Oil Plantation Funds.
The revised act signed by President Joko Widodo on Aug. 15 and come into effect on Sept. 1. The revision are provided by the government to boost the use of biodiesel in all sectors.
With the Presidential Regulation, the mandatory B20 which initially only targeted the Public Service Obligation (PSO) sector now also includes the non-PSO sector. This includes the use of heavy equipment in the mining sector, military equipment, ships, and others.
Based on the new act in Article 18 Paragraph 1, it said government will give an incentive to cover the difference between the price of biodiesel purchased by a business entity and the selling price to the public. Furthermore, at the paragraph 2 stated that the amount of the incentive to be paid will be verified first by the Energy and Mineral Resources ministry with the help of surveyors.
Based on the regulation the Palm Oil Fund Management Agency collects levies from palm oil exporters and the proceeds are used to finance government palm oil programs such as biodiesel and crop replanting.
In 2017, the chief executive Dono Boestami said the agency has collected Rp14.2 trillion ($979.31 million) in levies and provided subsidies on 2.3 million kiloliters of biodiesel.
Currently, Indonesia imports around 400,000 barrels per day of crude oil and a roughly similar amount of refined products, which makes the economy vulnerable to the increases in global crude prices that have occurred since last year.
Followed the new regulation, its expected the effort to use biodiesel in the country could also utilize palm oil production and to reduce crude diesel imports. On the other hand, by pressing imports, it can strengthen the Rupiah and lowered the current account deficit (CAD).
Recently government has announced to use B20 for all transportation vehicles to maintain CAD at the save level below 3 percent of GDP. Based on the government calculation, the new policy will save the country’s foreign exchange up to US$20 billion this year and $40 billion next year.
The officials also estimate biodiesel consumption will rise to between 5.5 million to 6 million kiloliters in 2019, from 4 million kiloliters this year.
Separately, Indonesia’s energy ministry planned to issue its regulation and guidance regarding the blending and biodiesel supply quota allocations later this week, Rida Mulyana, a senior ministry official, told Reuters.