Indonesia suspends subsidies on palm oil biodiesel, replanting and replanting

An official announced on Thursday that Indonesia has temporarily frozen the distribution of subsidies to its mandatory biodiesel programmes and palm oil replanting programs due to a restructuring at its palm fund agency.

Achmad Maulizal, an official at BPDPKS said that the agency is undergoing changes since it now has responsibility for managing cocoa and coconut funds.

The agency is responsible for collecting export levies on palm oil products, and then distributing funds to finance programmes like mandatory biodiesel production, replanting, and research.

Details of the scheme are still pending. The government asked BPDPKS for help in developing cocoa and coconut sectors, including financing replanting both commodities.

Maulizal stated that "we are waiting for the new organizational structure and work system" adding that he hopes the transition will be completed as soon as possible.

Indonesia has also increased the mandatory blend to 40% palm oil in biodiesel (B40), up from 35%.

In November, the agency warned that a higher blend was required to be subsidized by 68%.

The government has announced that in order to reduce the cost of subsidizing biodiesel, only 7.55 million of the 15.6 million kilolitres of biodiesel produced will be subventioned by the agency.

Ernest Gunawan said that the freeze on subsidies will not affect biodiesel supply as long as it doesn't last more than three months.

He said that as long as the invoices were paid within 90 days it was safe.

Gulat M. Manurung, the chairman of the palm oil smallholders' association Apkasindo said that the group had not received any information about the freeze. However, he said that the government has allotted funds for replanting 120,000 hectares this year. (Reporting and writing by Fransiska Nanangoy, with additional reporting from Dewi Kurniawati. Editing by Martin Petty & Jason Neely).

(source: Reuters)