Indonesia to force manufacturers to use biofuel

JAKARTA: Indonesia, the world's largest producer of palm oil, plans to force manufacturers to use biofuels for some of their energy needs to reduce dependence on imported oil amid soaring global prices.

The government also wants to cut spending on fuel subsidies, which were put in place decades ago to protect the country's poorest but now account for almost half the budget.

Efita Legowo, a member of the Energy Ministry's biofuel team, said a decree would be issued in October stipulating that factories use palm oil and other cleaner burning fuel for 2.5 per cent of their total needs.

The nation of 235 million people sees promoting the biofuel sector as a way of reducing dependence on foreign oil while alleviating poverty and creating jobs. But lawmakers worry it will push up the price of palm oil, which is widely used for cooking by the poor.

Environmental groups also warn it will contribute to the destruction of forests in Indonesia's Kalimantan region, where massive oil palm plantations are being established to meet global demand.

The new energy policy sets a target of making biofuels account for 5 per cent of the energy mix by 2025. Some critics of a similar European Union plan say the push for the use of biofuels is a major factor in soaring food prices.

Together, Malaysia and Indonesia provide 87 per cent of the world's palm oil. Nearly 15 million acres (about 6 million hectares) is covered by palm-oil plantations.