While the government's move was welcomed by the Indonesian Palm Oil Association (GAPKI), which said it was "good for the industry", activists criticized the decision saying the fund was intended to empower small palm oil producers to 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 just the beginning.
The total needed to keep the biodiesel program running was US$$250 million, Indrawati said. The balance of around US$$55 million would come from biodiesel producers through an increase in export tariffs, starting May 1.
The Indonesian government is pushing for greater domestic palm oil consumption through its B30 program – a biodiesel blend that contains 30% biofuel. Their ultimate goal is B100, removing diesel completely.
Aiming to stimulate this program, Eco Business said the US$$195 million subsidy to the state palm oil fund, known by its Indonesian acronym BPDP-KS, would subsidize biodiesel prices at the pump to remain competitive with common diesel, following the crash in oil prices earlier this year.
By law, the government was not authorized to allocate funding from the state budget for biodiesel subsidies. However, the US$$195 million increase came from the state budget, thanks to an executive order that granted the government additional powers to deal with the COVID-19 pandemic.
“This [government] subsidy is temporary and is only in effect for 2020,” said Sri Mulyani.
Meanwhile, several associations of small oil palm producers have launched an online petition, Eco Business reported, demanding that the subsidy be diverted to small farmers instead of large producers.
Source: OFI Magazine
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