Indonesia Allocates US195M Subsidy to Palm Biodiesel Producers

Thursday, July 30, 2020

The Indonesian government has given a US$195M stimulus to the biodiesel industry, Eco Business recently reported. Although the government’s move was welcomed by the Indonesian Palm Oil Association (GAPKI), which said it was ‘good for the industry’, campaigners criticized the decision saying the fund was meant to empower small oil palm farmers not subsidize the giant multinationals that produced biodiesel.

Declaring the biodiesel subsidy as part of the government’s COVID-19 economic recovery plan, Finance Minister Sri Mulyani Indrawati said it was only the start. The total needed to keep the biodiesel program afloat was US$250M, Indrawati said. The balance of about US$55M would come from biodiesel producers through an increase in export tariffs, effective from 1 May. By law, the government was not allowed to allocate funding from the state budget for biodiesel subsidies. However, the US$195M boost came from the state budget thanks to an executive order granting the government extra powers to deal with the COVID-19 pandemic.

The Indonesian government is pushing for greater domestic consumption of palm oil through its B30 program, a biodiesel blend that contains 30% palm oil biofuel. Its end goal is B100, removing diesel completely. Aimed at stimulating that program, Eco Business said the US$195M subsidy to the state palm oil fund, known by its Indonesian acronym BPDP-KS, would go towards subsidizing biodiesel prices at the pump to stay competitive with regular diesel, following the crash in petroleum oil prices earlier this year.  

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