Government Prepares Financing Scheme for Gasoline Mixed with Bioethanol Mandate

Indonesia's Ministry of Energy and Mineral Resources is developing a specific financing scheme to address the price difference between bioethanol-blended gasoline and conventional gasoline. This initiative is a key part of the upcoming mandatory biofuel program. Minister of Energy and Mineral Resources Bahlil Lahadalia stated that the framework is designed to benefit domestic producers and farmers while managing market price disparities, especially when global crude oil prices fall below bioethanol production costs.

"We will develop a healthy financing mechanism that benefits the industry, farmers, and the country," Lahadalia told reporters in Jakarta. The proposed model is expected to be similar to the Palm Oil Plantation Fund Management Agency (BPDPKS), which currently manages biodiesel subsidies. Under this plan, the government will set reference prices for bioethanol's primary feedstocks, such as corn, cassava, and sugarcane, ensuring stable profits for local farmers.

This initiative supports Indonesia's strategy to reduce its heavy reliance on gasoline imports. Following extensive policy reviews, the government plans to implement a mandatory 10% bioethanol blend (E10) starting in 2027, with a gradual increase to an E20 blend between 2028 and 2029. This phased approach aims to integrate bioethanol into the national fuel supply.

However, industry experts identify cost competitiveness as a significant hurdle. Ali Ahmudi Achyak, an energy expert from the University of Indonesia, noted that while alternative feedstocks like sorghum do not compete with food supplies and are more cost-effective than sugarcane or corn, bioethanol generally remains more expensive than conventional gasoline. To overcome these cost barriers, Achyak urged the government to introduce targeted supply-side incentives, including subsidies for seeds and fertilizers, and dedicated research funding to boost feedstock productivity.

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We will develop a healthy financing mechanism that benefits the industry, farmers, and the country.