DAVOS – Indonesia has no plans to reduce the percentage of palm oil in biodiesel below its current level by 30% to ensure the country’s energy supply, its economic affairs minister, Airlanga Hartarto, told Reuters on Monday.
“With palm oil, we reduce our dependence on oil. And now if we compare the price of palm oil and the price of energy, you have to give more (subsidy) in energy. So the problem will be fuel security, “Hartarto said in an interview.
He added on the sidelines of the World Economic Forum at the Swiss Alpine Resort in Davos:
Hartarto said Indonesia, which is the source of 60% of the world’s palm oil, has imposed 30% on biofuels to reduce the country’s dependence on crude oil.
“If you depend on oil, today you are in a catastrophic situation with (a) oil prices approaching $ 110 (a barrel),” said Hartarto, adding that the budget for which Indonesia is budgeting has been increased from $ 60 to $ 100.
Indonesia cut exports of crude palm oil and some derivatives products in April in a bid to lower local prices for cooking oil. The embargo has hit global edible oil markets amid supply shortages from the war in Ukraine.
“In Indonesia, energy prices are not passed on to the people. So the government provides a delta (difference) between the price of electricity and the affordable price, “said Hartarto.
The Indonesian Ministry of Commerce on Monday issued rules stating that companies must obtain an export permit that will only be issued to individuals capable of meeting the so-called Domestic Market Obligation (DMO). The regulations do not specify what the DMO will include, but the permits will be valid for six months.
A DMO policy, where producers have to sell a portion of their products locally at a certain price level, was used as a way to ensure local supply before the recent ban, but failed to control the price of cooking oil.
Asked which part of palm oil should be sold internally under the DMO, Hartarto said the goal was to make it 20%.
“Right now, (DMO) is 30%, but if oil prices fall, it will come down to 20%,” he said.
Hartarto said Indonesia’s growth outlook was the strongest in the region at 5% in the last two quarters and was comparable to that of Vietnam.
“We are still optimistic that growth could be 5%, but subject to energy prices,” he said. (Reporting by Davia Chowdhury in Davos; Editing by Alexander Smith and Matthew Lewis)