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House hits out at biofuel subsidy

The government's proposal to subsidize biofuel mixed in Premium gasoline and diesel faces tough challenges from lawmakers. 

The lawmakers suspect that the policy would only benefit the producers. This suspicion was triggered by the presence of the Indonesian Biofuel Producers Association (APROBI) who accompanied the government in the hearing where the proposal was submitted. 

The government Monday proposed to Commission VII, overseeing the energy and mining sector at the House of Representatives, to allocate Rp 831.43 billion (US$70.61 million) to subsidize bioethanol and biodiesel mixed in with subsidized Premium gasoline and diesel. 

The figure was increased from the initial proposal of Rp 774.47 billion. 

Evita H. Legowo, director general for oil and gas at the energy and mineral resources ministry, said the higher figure was because the government estimated the consumption of subsidized Premium gasoline and diesel will exceed its initial quota. 

Earlier, the government had proposed the House to revise up the allocated quota for subsidized Premium gasoline from 19,444,354 kiloliters to 20,638,869 kiloliters and diesel from 11,605,183 kiloliters to 12,500,750 kiloliters. 

Evita said the volume of bioethanol and biodiesel mixed in with the two fuels would consequently rise. . 

"The Rp 831.43 billion is proposed to subsidize 206,389 kiloliters of bioethanol and 625,038 of biodiesel. The average subsidy will remain at the maximum Rp 1,000 per liter as we proposed earlier," Evita said. 

She added the subsidy would only be spent when the biofuel prices are higher than the fossil fuel prices and the maximum subsidy paid out will be capped at Rp 1,000 per liter. 

"We are proposing this subsidy to maintain the stability of biofuel supply to the domestic market," Evita Legowo said. 

In September, the government issued a regulation mandating the use of biofuel by manufacturers, commercial businesses, fuel retailers and power plant operators. 

State oil and gas company PT Pertamina, the sole distributor of subsidized fuels, was ordered by the government to use at least 1 percent biopremium in subsidized Premium gasoline and up to 5 percent of biosolar in subsidized diesel. 

Paulus Tjakrawan, APROBI's secretary general, said that biofuel producers had suffered losses by selling their products to Pertamina.. 

"At the moment, the biofuel market prices are higher by between Rp 800 and Rp 1,200 a liter than the Pertamina prices," Paulus said. 

However, the presence of APROBI in the hearing was questioned by most of the lawmakers. 

"We want the government to explain clearly what is behind this subsidy propossal. The discussion about subsidies cannot be done with other parties, because it will be prone to colussion," said Effendi Simbolon. 

Alvin Lie voiced a similar argument. "The government must make it clear as to where the proposed subsidy will go. Is it to the people or to the biofuel producers," Alvin said. 

Lawmakers and the government agreed to hold another meeting to discuss this matter further.
Source:Alfian , The Jakarta Post , Jakarta | Tue, 02/10/2009 2:39 PM | Business