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Indonesian incentives for biodiesel producers

18th April, 2008

In Indonesia, the National Biofuel Development Committee (NBDC) has asked the government for a tax cut for biodiesel producers to help encourage the production against high prices of palm oil.

Evita Legowo, secretary of NBDC, says the proposed tax cut is in the form of a reduction in the value-added tax (VAT).

The price of palm oil, the main ingredient in making biodiesel, has almost doubled in the past 12 months and risen to as much as 3,914 ringgit (€783) a tonne.

Legowo said the tax cut was necessary for biodiesel producers to keep business viable despite the surging price of its raw commodity. She added that the proposed tax cut adopted the same mechanism applied in the newly introduced palm oil export tax, which had been set progressively in line with the CPO price traded in the Rotterdam commodity market.

Under the policy, introduced early February, the government sets a 15% export tax if CPO is priced between US$1,100 (€693) and $1,200 per tonne. The tariff increases to 20% if the price is $1,200 to $1,300 and 30% if the price exceeds $1,300 per tonne.