DAVOS – Economic Coordinating Minister Airlangga Hartarto has stated that Indonesia will maintain the current percentage of palm oil in biodiesel at 30 percent and has no plan to lower it.
He said that it is aimed to ensure the national energy resilience. “We use the palm oil to reduce our reliance on the oil fuel. If we compare the price of CPO and the energy, then we have to provide higher subsidy to the energy. The problem is the energy resilience. The percentage of blending will not be cut as we need to prioritize the energy resilience,” Minister Airlangga said in an interview as reported by Reuters on Tuesday, 24 May 2022.
According to Airlangga, Indonesia as the producer of 60% of global palm oil has implemented the mandatory biodiesel program to produce biodiesel with a mixture of 30 percent palm oil and 70 percent diesel fuel in order to reduce its dependence on the fossil fuel.
“If you rely on the oil fuel under current condition when its price already reached USD110, it will be a disaster,” he said, adding that Indonesia’s macro-economic assumption of oil price has been raised from US$60 to US$100 per barrel.
Indonesia stopped the exports of CPO and its several derivative products in April before reopening it last week. The export ban, which was aimed to reduce the high price of cooking oil at domestic market, had affected the global market of cooking oil that had seen a supply shortage due to the Russia-Ukraine war.
Airlangga said that Indonesia applies the energy subsidy policy so that the global energy price increase will not burden Indonesian people. “So, the government covers the spread between the energy economic price and the affordable price,” he said.
The Indonesian trade ministry said on Monday, 23 May 2022, that it had issued a regulation that export licenses are only given to those companies already fulfilling their domestic market obligation (DMO). The DMO policy requires producers to sell a part of their palm oil production at domestic market at certain price. The policy was applied before the issuance of the CPO export ban as part of efforts to ensure the supply for local market, but apparently it failed to reduce the price of cooking oil, which is part of the staple foods for most of Indonesian people.
According to Minister Airlangga, based on the new DMO policy companies will be required to sell 20 percent of their production at local market. “Currently, the DMO is 30%. But it will be cut to only 20% if there is a decrease of oil price,” he said.
He also said that Indonesia is optimistic on the prospect of its economic growth. “Indonesia has become one of the strongest economies in Southeast Asian region with an economic growth of 5.0% during the last two quarters, comparable with that of Vietnam. We’re still optimistic our growth will stay at 5.0%, but it depends on the price of energy,” he said. (*)
Source: sindonews.com | Featured image via promediateknologi.com
