Indonesia’s government is planning to pay a subsidy to palm oil biofuel producers this year to ensure the stability of the market.
Biofuel became more expensive than crude oil-based fuel after oil prices dived more than 70% from their peak in July last year.
Under the plan, if prices of biofuel products are higher than crude oil-based fuels, the government will pay a subsidy of 1,000 rupiah (€0.07) per litre on average.
‘At the moment, palm-based biodiesel is more expensive than crude oil-based diesel, but prices of bioethanol are not,’ Evita Legowo, director general of oil and gas at Indonesia’s energy ministry, comments.
Bioethanol is made using both cassava and cane molasses. Palm biofuel and bioethanol compete with cheap domestic petrol diesel in Indonesia, one of the lowest priced in Asia because of generous government subsidies.
Palm-based biodiesel prices were around 5,800 rupiah per litre on 30 January, or about 1,500 rupiah higher than diesel.
State run PT Pertamina, which sells subsidised fuel products, is estimated to blend 194,444 kilo litres of bioethanol and 580,025 kiloliters of palm-based biodiesel in 2009.
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