GAPKI and Indonesia Palm Oil Association objected to 50% bio diesel mandate under B-50

16-Nov-2024 10:04 AM

GAPKI and Indonesia Palm Oil Association objected to 50% bio diesel mandate under B-50
The Indonesian Palm Oil Association (GAPKI) has raised significant concerns about the government's plan to implement a B-50 biodiesel mandate in 2026, which would require biodiesel to be composed of 50% palm oil. GAPKI argues that the move could create a major imbalance between supply and demand for palm oil, leading to a substantial reduction in exports and potentially putting pressure on domestic production.

Here are some key points raised in opposition to the B-50 mandate:
Export Impact: GAPKI estimates that palm oil exports could drop by as much as 6 million tonnes (60 lakh tonnes) due to the increased domestic consumption under the B-50 program. This could significantly affect Indonesia's export market, especially considering palm oil is one of the country's main export commodities.

Declining Palm Oil Production: Palm oil production in Indonesia is already facing challenges. In August, Crude Palm Oil (CPO) production declined by 4.8% compared to the same period last year, amounting to 36.72 million tonnes. With the B-50 mandate in place, domestic consumption would rise, further straining the supply, which is already under pressure.

Increased Domestic Consumption: Domestic consumption of palm oil has increased, jumping by 1.94 lakh tonnes to 15.57 million tonnes. As the B-50 program would boost this consumption even further, it exacerbates concerns about the sustainability of domestic supply, particularly as palm oil production is already on the decline.

Government Pressure: The Indonesian government is under increasing pressure to delay the implementation of the B-50 mandate, considering the concerns raised by GAPKI and others in the industry. The program is currently set to take effect in 2026, but stakeholders are advocating for a reassessment of its feasibility.

The B-50 biodiesel program is part of Indonesia's broader strategy to reduce reliance on fossil fuels and promote renewable energy. However, the challenges of balancing domestic demand with export obligations and ensuring adequate production capacity for palm oil are making the implementation of this policy contentious.

The debate is ongoing, and the government may need to reconsider the details of the B-50 program to avoid adverse economic impacts while still pursuing its sustainability and energy goals.