JAKARTA \u2013 The Institute for Development of Economics and Finance (INDEF), through Green Transition Initiative (GTI), has stated that the mandatory program of biodiesel 50 percent (B50), which has been implemented nationally since 01 July 2026, is still facing a number of challenges.<\/p>\n
The government has formally started the implementation of the B50 program since 01 July 2026 in many sectors, which include motor vehicles, mining heavy equipment, and trains. The policy is aimed at strengthening national energy resilience and reducing reliance on import of diesel fuel.<\/p>\n
Andry Satrio Nugroho, Head of Industrial and Transportation Decarbonization at INDEF GTI, stated that market absorption for B50 is relatively secure because biodiesel is already part of the subsidized diesel and Public Service Obligation (PSO) mandates.<\/p>\n
However, a more significant issue lies in the program’s financing. “The implementation of B50 has the potential to reduce state revenue from crude palm oil (CPO) exports. This is because the increased demand for the biodiesel program will divert a portion of CPO supplies from the export market to the domestic market,” Andry said in a statement received on Wednesday (01\/07\/2026).<\/p>\n
Andry noted that exported CPO is subject to two types of levies: an export levy\u2014which is collected by the Plantation Fund Management Board (BPDP) for funding a number of palm-related programs that include the biodiesel program\u2014and an export duty, which contributes to the State Budget (APBN).<\/p>\n
Furthermore, selling CPO to the domestic market at lower prices could reduce palm oil companies’ profits, thereby shrinking corporate income tax (PPh) revenue from the sector.<\/p>\n
On the other hand, a decline in exports also reduces the funding source for biodiesel incentives, as BPDP funds are derived from CPO export levies. In other words, just as the need for incentives rises, the source of funding risks shrinking.<\/p>\n
“Pressure on program funding intensifies when global oil prices fall. Biodiesel incentives are used to cover the price gap between Fatty Acid Methyl Ester (FAME) and diesel fuel,” he explained.<\/p>\n
Andry estimates that incentive requirements would reach approximately IDR 41.3 trillion if Brent crude prices hover around US$85 per barrel. The risk of a deficit is considered even greater if oil prices drop much lower per barrel.<\/p>\n
\u201cThe CPO export levy rate needs to be raised to around 23.8 percent\u2014nearly double the current rate of 12.5 percent,\u201d he said.<\/p>\n
He added that fiscal pressure could also shift toward fuel subsidies, given that B50 is used in subsidized diesel, which receives a fixed subsidy per liter from the state budget (APBN).<\/p>\n
This is because, as long as the price differential between FAME and diesel is covered by the BPDP, the impact on the state budget remains relatively limited. However, if the BPDP is no longer able to finance this gap, the additional costs could potentially be shifted to fuel subsidies or compensation payments.<\/p>\n
Andry noted that raising the biodiesel mandate from B40 to B50 could drive up cooking oil prices. This is due to the increased allocation of CPO for biodiesel, which could reduce the supply of raw materials for domestic cooking oil.<\/p>\n
In terms of infrastructure, the government is considered sufficiently prepared to implement B50 starting in July 2026. Nevertheless, downstream facility capacity still needs to be strengthened\u2014particularly regarding jetties, storage tanks, and biodiesel logistics and blending systems.<\/p>\n
\u201cIncreasing the biodiesel blend from B40 to B50 is expected to raise FAME demand by approximately 25 percent, making supply chain readiness a crucial factor,\u201d he stated. (*)<\/p>\n
Sawitindonesia.com.<\/em> Indef: Pemerintah Perlu Waspadai Defisit Pendanaan Biodiesel. https:\/\/sawitindonesia.com\/indef-pemerintah-perlu-waspadai-defisit-pendanaan-biodiesel\/.<\/em>