The Palm Scribe

Mandatory B30 Policy Benefits Palm Oil Players, Government.

Illustration of palm oil farmers in b30 mandatory
Photo by AFP

The implementation of the Mandatory B30 policy, requiring a 30 percent mixture of palm oil-based biofuel in diesel fuel, is benefiting both players in the palm oil sectors as well as the government, the latest report issued by PT Indeks Komoditas Indonesia (IKI) showed

The “Indonesia Palm Oil Report” published in February showed that in 2020, the volume of B30 needed could reach up to 9.59 million kiloliters and this could lead to up to $5.13 billion (around Rp63.39 trillion) in foreign exchange savings. Production at that level would also be able to maintain jobs for 1,2 million workers in plantations and 5,055 outside of plantations and also reduce glasshouse gases effect by 14.25 million tons of CO2.

“IKI deems that the B30 program has become a good policy, not only for palm oil producers but also for the state. Palm Oil players can benefit because their CPO (Crude Palm Oil) can be absorbed domestically and thus they would not need to worry too much about the conditions of the international market. The government, meanwhile, can benefit by reaping foreign exchange, improving its trade account and reducing its fuel imports,” the report said.

The Mandatory B20 program was launched in January 2016 and had resulted in three million kiloliters of the biodiesel being absorbed by the domestic market. In 2019, the volume absorbed went up to reach 6.623 million kiloliters. This has led to $3.54 billion in foreign exchange savings. This has also been able to add value to CPO by Rp9.68 trillion while also providing jobs for 828,488 people in plantations and another 6,252 people outside of plantations. The policy has also reduced the effect of greenhouse gases by 9.91 tons.

The IKI report also said that B30 had a lower water content compared to B20, at 350 mm/kg compared to B20’s 500 mm/kg. This lower water content raises the quality of the biodiesel, reducing the possibility of residues forming in the fuel tank, and also damage to the injector in the engine. The Association of Motorized Vehicle Industries of Indonesia (Gaikindo) which had recommended the water content level for B30, said that such water content level would thus not necessitate any adjustment to be made on current engines.

B30 also has a lower acidity level at 0.4 mg-KOH/g compared to B20’s 0.6 mg-KOH/g. At 40 degrees Celcius, B30 also possesses a higher kinematic viscosity at 2.3-6.0 mm3/g compared to 2.0-5.5 mm3/g in B20.

Also read: Indonesian Palm Oil Growers Hail Mandatory B30 Program

The report however, also pointed to the constraints faced in implementing the Mandatory B30 policy. From the transportation aspects, more means of transport would be needed than for B20.

In the sea transportation sector, there is a limited number of large ships to transport FAME, the main palm oil-based raw material to mix with the diesel oil. So far, there are only smaller vessels available. In the land transportation sector, the Over Dimension Overload (ODOL) restricts transportation at only 16,000-18,000 liters.

“IKI deems that if this regulation is applied, it would have a domino effect, starting from worries of late delivery, or supply shortages up to higher transportation costs,” the report said, adding that up until now, the government was still studying whether the regulation would need to be postponed so that supplies can be safeguarded. CPO used to be transported using truck with a capacity of 30,000 liters.

A number of officials have already said that the government planned to start testing the use of B40 this year and commenting on this, IKI called on the government to not be too hasty in making the use of B40 mandatory.

“IKI sees that the ideal timeframe to implement the B40 should be like the transition from B20 to B30, that is three years. This takes into consideration the readiness of consumers and producers, quality and the availability of adequate infrastructure,” IKI said in its report.

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