Indonesia approves threefold rise in biodiesel subsidies in boost to palm oil companies

The Indonesian government's proposal to ramp up biodiesel subsidies overcame its final parliamentary hurdle on Friday, an Energy Ministry official said, noting that the subsidy increase could take effect next month. -- PHOTO: REUTERS
The Indonesian government's proposal to ramp up biodiesel subsidies overcame its final parliamentary hurdle on Friday, an Energy Ministry official said, noting that the subsidy increase could take effect next month. -- PHOTO: REUTERS

JAKARTA (Reuters) - The Indonesian government's proposal to ramp up biodiesel subsidies overcame its final parliamentary hurdle on Friday, an Energy Ministry official said, noting that the subsidy increase could take effect next month.

"The biodiesel subsidy is 4,000 rupiah per litre," Bio-energy and Renewable Energy Director Dadan Kusdiana told Reuters, noting that the government would use funding that had been allocated to subsidise diesel. "Biodiesel consumption contributes 10 per cent of the total targeted diesel consumption of 17.05 million kilolitres."

The new biodiesel subsidy will be applied after the government revises its regulation on a pricing formula for diesel, Kusdiana said. "Hopefully the new pricing (regulation) can be applied in March."

President Joko Widodo's government is looking to protect Indonesia's fledgling biofuel industry against lower crude prices.

Any increase in the subsidy could potentially boost demand for palm oil used for blending into biodiesel, a demand that dwindled after crude oil prices plunged 60 per cent between June and late January.

Shares of Singapore-listed palm oil companies - Golden Agri-Resources, Wilmar International, Indofood Agri Resources and First Resources - jumped on Friday (Feb 6) on news on Thursday that an influential energy parliamentary committee and the Energy and Mineral Resources Ministry had agreed to the biodiesel subsidy hike.