Indonesia Taking Steps To Achieve Energy Self-Sufficiency

When many countries, including neighboring country Singapore, are threatened by economic recession, Indonesia has a chance to increase its economic competitiveness. Indonesia can achieve an energy self-sufficiency as an initial step to increase its economic competitiveness at global market.

How will Indonesia achieve an energy self-sufficiency? Certainly, it will achieve it through a continual implementation of the mandatory biodiesel program, which has reached at the level of biodiesel 30 percent (B30) this year. That means, the diesel fuel consumed by the public under the public service obligation (PSO) program or non-PSO one is processed with a mixture of 30 percent fatty acid methyl ester (FAME) derived from palm oil. The government and the public have been enjoying many benefits from the biodiesel program.

The government has been implementing the mandatory biodiesel program in stages since since 2008 when it was started with a mixture of 2.5 percent. Gradually, the biodiesel percentage increased until 7.5 percent in 2010. During the period of 2011 – 2015 the biodiesel percentage was increased from 10 percent to 15 percent. Then on 1 January 2016, the biodiesel percentage was further increased to 20 percent (B20). The mandatory B20 program was progressing well with the incentive from the oil palm plantation fund management board (BPDPKS) for PSO. And since 1 September 2018, the incentive was expanded to the non-PSO biodiesel.

This year, the implementation of the mandatory biodiesel program has reached the level of B30. It has created a powerful multiplier effect, not only for the state income but also for the public welfare (especially for smallholders) and environmental protection as the biodiesel is more friendly to the environment compared to the fossil-based diesel fuel.

During last year alone, the government managed to save a foreign exchange of USD3.54 billion or Rp44 trillion from the implementation of the B20 mandatory program. It is estimated that this year the government will be able to save USD5.13 billion or about Rp63.4 trillion from the implementation of B30 mandatory program. It is a huge saving amid the global economic slump due to the outbreak of Covid-19 pandemic.

Another positive impact of the mandatory B30 program implementation is the increase of public welfare, especially the smallholders. Indonesia is the world’s largest producer of palm oil with total production reaching 53 million tons (in 2019) and 70 percent of the production was absorbed at export markets. The palm oil industry has contributed every year foreign exchange income from exports at a total of USD20 billion or about Rp300 trillion.  Indonesia has a total acreage of oil palm plantation at 16.3 million hectares, with 43 percent being owned by smallholders.

The Covid-19 pandemic has caused a significant decrease of various commodities’ prices, including crude oil that had once dropped to USD20 per barrel. But despite of the very cheap price of crude oil, the government is still consistent in implementing the B30 mandatory program. To support the program, the government increased the export tariff of crude palm oil (CPO) to USD55 per ton since 1 June 2020, from the previous tariff of USD50 per ton. Besides, the government has also allocated a budget fund of Rp2.7 trillion to support the mandatory program of B30.

The policy is effective to maintain the stability of palm oil, so that smallholders will continue to enjoy the good price of their fresh fruit bunches (FFB), while other economic sectors are struggling to survive.

The mandatory B30 program will not only push Indonesia toward reaching an energy self-sufficiency by developing the palm oil based energy, but it will also uplift Indonesian economy at global level.  What is needed now is the consistency of the government’s policy to continually push up the development of the palm oil based biodiesel. (*)

*) Tofan Mahdi is the communication division head of the Indonesian Palm Oil Association (GAPKI) | Featured image via