21/5/07 (The Jakarta Post) - Biofuel producers are urging the government to make the use of biofuel compulsory in order for the eco-friendly fuel business to become more economically viable.

A member of the Indonesian Biofuel Producers Association Paulus Tjakrawan told The Jakarta Post over the weekend that such a regulation, in which industry players and vehicle owners were required to use a certain amount of biofuel, was needed for the development of the biofuel industry.

Paulus said the Philippines government had been courageous last year when they decided to adopt a similar policy.

"In the first year the biofuel legislation was introduced, every factory and vehicle in the Philippines was required to use at least one percent of biofuel in its fuel usage, and in the second year, that percentage when up to two percent.

"The country has already established a very clear road map, even though they only started the program last year," Paulus said.

Such a move in Indonesia would not harm businesses across the board, Paulus said, as fuel costs would still be quite acceptable.

"In fact, it would bring benefits to companies in that they could create an image of being an environmentally friendly business, which has become quite a selling point these days amid the increasing awareness of environmental and climate issues," he said.

The association also hopes the government will offer incentives in the form of tax relief to biofuel producers.

The president director of biofuel producer PT Eterindo, Immanuel Sutarto, has questioned the feasibility of the biofuel business in the long run, as producers will have to cope with the increasing prices of crude palm oil (CPO) and ethanol, which are two major raw materials used to produce biofuel.

State-owned oil and gas company Pertamina declared last week that the company planned to scrap its biofuel business by the end of this year as its biofuel products -- BioSolar and BioPremium -- caused the company to lose Rp 16.9 billion (approximately US$1.8 million) last year due to increasing ethanol and CPO prices.

Pertamina marketing and trading director Achmad Faisal urged the government to provide financial incentives for producers of ethanol and CPO.

Evita H. Legowo, the first secretary of the National Biofuel Development Committee, said the government was considering halving the tax rate on biofuel used in cars, trucks and motorbikes to 2.5 percent from the current five percent.

Evita also said the government would consider adopting the methods employed by developed countries to promote biofuel usage, such as imposing additional taxes on conventional fuels.

Indonesia is expected to produce 600,000 tons of biofuel this year. Among the major producers are PT Wilmar with a production rate of 350,000 tons per year, Eterindo with 120,000 tons per year and PT Sugar Group with 70,000 tons per year.