Thursday, August 17, 2006

Biofuel subsidy of US$110 million

President Susilo Bambang Yudhoyono proposed US$110 million state subsidy for biofuel development for 2007 budget. Who will get the benefits?

"For the purpose of developing biofuel energy, the Government will utilize the asset expenditures allocation from various ministries and related institutions to support that program. In addition, it will also be made available credit interest subsidy for biofuel industry amounting to Rp1 trillion," the president said.
No details in the statement of who will get the subsidy. But I assume the developers will get that even though it's not clear whether the jatropha curcas or palm oil plantions or those who process jatropha and CPO into biofuel would get the same share. It's not clear indicative target of biofuel production out of the Rp1 trillion interest subsidy. But I have to say, supervision of this subsidy would be the critical point. Who will get what amount and who would decide?
US implement tax credit for biofuels. Ethanol's federal tax credit is by now 51 cents per gallon (in European terms, 10.5 euro-cents per litre). So-called “small” producers, making up to 30m gallons a year, get an extra 10 cents. Several states add their own tax breaks, which can be worth 10-20 cents a gallon.
Biofuels tend to be used in mixtures. Europeans typically use “B5”—standard diesel, blended with 5% biodiesel, usually made from rape (canola) oil. In America, many drivers, often unaware of it, are using E10 “gasohol”—10% ethanol, 90% standard gasoline.
So, it would be naive to have everybody owns/operate gas stations in Indonesia as some ministers said.
Let me just quote the president's further statement on biofuel below:
Government is also drawing up measures for the development of alternative energy that is vegetable-based or biofuel. This National Programme has been set in motion this year with the development of energy with the basic materials of palm oil, sugarcane, cassava, and castor oil plant. For certain regions, especially those that are remote and underdeveloped, we will carry out a program of energy-independent villages, based on castor oil plant. Therefore, those villages are expected to be able to meet their energy needs, without having to depend on diesel fuel and kerosene. In the medium term, this energy policy is anticipated to be able to create new employment opportunities for around 3 to 5 million persons. In this manner, this measure will also reduce the figure of unemployment and poverty, as well as reducing BBM subsidy in a significant way.

We hope so Mr President. All we need is detail of the program's implementation!

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