Indonesia gives tax incentives

The Indonesian government plans to make it mandatory for the transportation sector to convert the entire diesel it uses to a 1% biodiesel blend and all gasoline to a 3% bioethanol blend by October, a senior official said. “The regulation has yet to be finalized, but is almost complete,” said Evita Legowo, director general of oil and gas at the Energy and Mines Ministry. The move is part of Indonesia’s push to cut its dependency on petroleum. Jakarta is planning to increase the biodiesel mandate for the transport sector to 2.5% of total volume in 2010. “Our target is for biofuels to contribute 5% of the national energy portfolio by 2025, Legowo said. Under the new regulation, the industrial sector would also be required to use fuel containing at least 2.5% biodiesel, with the percentage set to rise in the future. The policy allows authorized fuel retailers, including foreign oil firms Royal Dutch Shell and Petronas and state-owned PT Pertamina to blend the biofuels. PT Pertamina has suffered losses in selling biodiesel because the government subsidizes it at the same level as fossil fuels, leaving the firm to cover the difference when biodiesel production costs exceed those of fossil fuels. However, the government plans to provide VAT exemptions and automotive vehicle tax reductions for the biofuels industry. Legowo said the incentives would be fixed once the mandatory biofuel use is implemented. (July 18/August 6/7/12, 2008)