The Biodiesel Industry Has Followed Government Rules

Illustration. (Photo: Doc. Ministry of Agriculture)

JAKARTA - The biodiesel industry in Indonesia is in accordance with the government's direction as an effort to build energy independence in the country, as well as support the oil palm plantation sector.

This is in response to the demonstration of a non-governmental organization (NGO) on behalf of oil palm farmers, and continues to voice about entrepreneurs who are considered to benefit from biodiesel subsidies.

"Producents should not continue to be victims (victims) because they follow government regulations. If anything is violated, there is a legal process," said the Executive Director of the Palm Oil Agribusiness Strategic Policy Institute Policy (Paspi) Tungkot Sipayung, Tuesday, November 14.

According to him, the biodiesel subsidy is actually not given to business actors, but to consumers. The reason is, the price of biodiesel depends on the price of CPO and world fuel.

The government has set the Purchase Index (HIP) prices for diesel and biodiesel HIP. If the solar HIP is cheaper than the biodiesel HIP, then BPDPKS closes its difference (HIP biodiesel reduced HIP solar). On the other hand, if the Solar HIP is more expensive than the biodiesel HIP (as it is today) there is no subsidy from BPDKS.

On that occasion, Tungkot also explained that the cartel in the palm oil industry, especially cooking oil in Indonesia, did not exist economically because the number of players was large.

"The ideal is perfect competition, where the players are many, uniform, and there is no competition but it's only in the text book," he said.

In Indonesia, he said, there are many cooking oil players, namely around 100 producers from small to large scale. Of this number, around 70 producers are members of the Indonesian Vegetable Oil Industry Association (Gimni).

According to the economic adage, if there are many players in an industry, even if they are encouraged to carry out a cartel it will not happen because the industry will run alone. The conditions will be different if the players are few, even if they are banned, there will still be cartels.

"Now there are 70-80 different producers and brands, that's quite a lot for the size of the palm oil industry in Indonesia," said Tungkot.

Another indication is that there is no cooking oil cartel, namely the competition for the domestic cooking oil market, not only palm oil, but also other vegetable oils from abroad, such as rapeseed and solar flower. In addition to abundant raw materials, there are many distributors and players in each province.

Is the price of cooking oil controlled? Based on Paspi data, domestic cooking oil prices follow the rhythm of world prices that show an integrated market internationally. Tungkot said that this condition was actually positive, which showed that the market in the country was efficient.

"Since 2019, domestic prices have been more stable than international. If there is a cartel, local prices will definitely participate internationally," he said.

Tungkot added that there is no cooking oil mafia that triggers scarcity. This happened due to the implementation of the domestic price obligation (DPO), namely the stipulation of the highest retail price (HET) for cooking oil of Rp. 14 thousand in the hands of consumers, even though there were distribution costs from producers to market and did not match the applicable CPO price. This caused producers to lose so as to cut their production.