Indonesia's state-owned oil and gas firm Pertamina plans to exit its biofuel business by the end of this year as a result of continued losses.
The company had no other choice but to get out of the sector as its biofuel products -- BioSolar and BioPremium -- had resulted in the company losing 1.8 million U.S. dollars, the Jakarta Post daily Saturday quoted Pertamina marketing and trading director Achmad Faisal as saying.
He said Pertamina, which began selling biofuel products in May last year, had incurred a loss of some 15.2 billion rupiah (about 9,000 rupiah equeals 1 U.S. dollars) on the sale of its BioSolar fuel up to the end of March, and another 1.7 billion rupiah on the sale of BioPremium.
A rise in palm oil and ethanol prices on the global market has made biofuel more expensive than oil-based fuels, he said at a seminar on biofuel recently.
Meanwhile, Pertamina fuel division head Djaelani Sutomo said that the company had lowered the content of fatty acid methyl ester (fame), which is made from palm oil, in its BioDiesel to 2.5 percent this month from 5 percent previously so as to reduce the losses. The company had also been reducing the ethanol content in its BioPremium to 3 percent from 5 percent since April 2007.
In order to make the biofuel business economically more feasible, Pertamina has been urging the government to provide financial incentives, such as tax relief for the producers of ethanol and crude palm oil (CPO), the raw materials used in biofuel production.
"If there is no certainty up until the end of 2007, then this program will have to be stopped. So it is up to the government," Faisal insisted.
Pertamina had also urged the government to subsidize the price at the pumps of BioSolar and BioPremium.
In response, the first secretary of the National Biofuel Development Committee, Evita H. Legowo, said the government might halve the tax on biofuel used by cars, trucks and motorbikes to 2.5 percent from the current 5 percent.