Govt mulling incentive package to back biofuel-related projects

The Jakarta Post, Jakarta

The government is considering offering fiscal and administrative incentives to investors planning to produce biofuel as part of an alternative energy program designed to reduce the use of fossil-based fuels.

"We are considering offering incentives related to taxation and customs duties, and the simplification of licensing procedures," Energy and Mineral Resources Minister Purnomo Yusgiantoro said Friday after opening a seminar on biofuel at his ministry.

He explained that the Finance Ministry would formulate the taxation and import duty incentives for biofuel production equipment.

Other ministries and governmental offices would also formulate incentives other than fiscal ones, he said. "The local administration, for example, could simplify the land use permit arrangements, the Agriculture Ministry could encourage the production of raw materials, the Industry Ministry could simplify plant licensing procedures, and the Energy and Mineral Resources Ministry could set out guidelines on the types of biofuel that the market needs," he explained.

The government still needed to discuss in more detail the types of the incentives that would be made available, he said.

Purnomo said biofuel could be produced from various raw materials, including crude palm oil (CPO), sugar and cassava, in this vast tropical country.

Crude palm oil can be used to produce biodiesel, a replacement for diesel, while sugar and cassava can be used to produce bioethanol to replace gasoline.

Besides biodiesel and bioethanol, the government would also promote the production of bio-oil, made of straight vegetable oil, and biogas, made of liquid waste and poultry droppings, both of which could be used as alternatives for kerosene.

According to the Energy and Mineral Resources Ministry's head of research, Neni Sri Utami, her staff had been researching biofuel since 1996.

"Actually, some biofuel is already available in the marketplace, such as E-10, a combination of 10 percent bioethanol and 90 percent gasoline, and B-10, a combination of 10 percent biodiesel and 90 percent diesel," she said.

In promoting the production of biofuel, the government already had a number of legal instruments at its disposal, including the Oil and Gas Law (No. 22/2001), Presidential Regulation No. 5/2006 on national policies for optimizing energy use, and Presidential Instruction No. 1/2006 on biofuel.

With the addition of the proposed incentives, the country has the potential to produce 720,000 kiloliters (kl) of biofuel per year between 2005 and 2010, 1.5 million kl per year over the five years after that up to 2015, and 4.7 million kl per year over the following ten years up to 2025, Purnomo said. (07)
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