Jakarta, CNBC Indonesia – The Indonesian government is very persistent in moving forward with the biodiesel program that has been running since 2016. In fact, the country is expected to save Rp 330 trillion in foreign exchange.
As is known, Indonesia depends heavily on imported crude oil to meet its domestic fuel needs. However, since the Russian-Ukrainian war broke out, driving up the prices of energy and raw materials. As an oil importing country, Indonesia also suffers.
The inflation rate also increased as the world price of crude oil rose above $100 a barrel. In addition, the high price of world crude oil also has an impact on the State Revenue and Expenditure Budget (APBN).
As an importing country, domestic fuel prices will obviously be influenced by world oil prices and the exchange rate of the rupee against the US dollar. If oil prices rise and the exchange rate of the rupee against the US dollar weakens, this country must be prepared for a surge in domestic fuel prices.
For this reason, the Indonesian government is trying under the leadership of President Joko Widodo (Jokowi) to continue to innovate through a biodiesel development program to be used as an alternative fuel material. So it is hoped that later RI will be able to reduce the share of crude oil imports.
In fact, the biodiesel program has been underway since 2016, starting with a program to blend 20% palm oil with 80% diesel fuel to produce B20 products.
Biodiesel development doesn’t just stop at B20, the government is again developing the B30 program, increasing the blend by 30% palm oil and 70% diesel. The program has been active since January 2020.
This year, the Ministry of Energy and Mineral Resources (ESDM) issued a new circular stating that the blending of Biofuels (BBN) of the biodiesel type with a percentage of 35% (B35) in Fuel Oil (BBM) of the Diesel type will enter into force on 1 February 2023.
The Ministry of Energy and Mineral Resources has set the biodiesel allocation for B35 in 2023 at 13,148,594 kiloliters (kl), up from the 2022 allocation of 11,025,604 kilolitres. In 2022, the government will still implement the B30 programme.
This assumes that diesel/diesel consumption in Indonesia will reach 37,567,411 KL this year, up 3% from the 2022 projection of 36,475,050 KL.
Along with the growing domestic demand for CPO, the government has done too plans to limit the quota of CPO exports again starting from 1 January 2023 in order to guarantee domestic supplies of CPO to face the month of Ramadan, Eid al-Fitr and the biodiesel programme.
The tightening was carried out by reducing the ratio between the volume of exports and the volume of internal market obligations (DMOs) carried out by companies.
Previously, the DMO volume was 1:8, meaning that palm oil players received CPO export permits eight times the DMO volume done domestically.
However, with the enactment of this new regulation, traders are only allowed to export six times the volume of DMOs done domestically, or 1:6.
Since the implementation of the biodiesel program in Indonesia, The Ministry of Energy and Mineral Resources (ESDM) has noted several benefits ranging from economic to environmental aspects.
In 2018, the biodiesel program managed to save up to IDR 26.67 trillion foreign currency equivalent and continued to increase to IDR 3.35 billion (assuming an exchange rate of IDR 15,585/USD) or IDR 48.19 trillion in 2019.
Meanwhile, in 2020, foreign currency savings reached $4.8 billion or Rp63.39 trillion. Throughout 2021, Indonesia implemented B30 and successfully saved US$4.54 billion or the equivalent of Rp70.75 trillion.
The Ministry of Energy and Mineral Resources expects foreign currency savings last year to reach US$7.82 billion or Rp121.87 trillion. Thus, foreign currency savings from 2018 to 2022 are projected to reach IDR 330.87 trillion.
In addition, the biodiesel program has also created jobs, especially for oil palm farmers, to reach 1.2 million people in 2020. The program can also reduce greenhouse gas emissions by 5.61 million tons of CO2 in 2018 to 14.25 million tons of CO2 in 2020.
However, going forward, Indonesia still has a major challenge with its biodiesel program, which is related to deforestation. Often the biodiesel program is seen as good for the downstream, while upstream it also causes environmental damage through deforestation. Why, when massive deforestation will impact the release of emissions and affect the climate.
It is not only the economic aspect that requires attention, but also the environmental one.
CNBC INDONESIA RESEARCH TEAM
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