GAPKI Proposes Flexible Biofuel Policy as Palm Oil Uptake for Biodiesel Rises 13.59%

Jakarta — The Indonesian Palm Oil Association (GAPKI) has proposed that the government adopt a more flexible biofuel policy, under which the allocation of palm oil to biodiesel would be adjusted in line with movements in palm oil and crude oil prices. The proposal comes as the latest data show palm oil uptake for biodiesel continuing to climb.

GAPKI Executive Director Mukti Sardjono put forward the proposal at the BIG Downstream Insights 2026 forum in Jakarta on Monday (5 October 2026), as reported by JournalArta. When crude oil prices are high, he said, the government could encourage the use of palm oil for biodiesel through incentives. Conversely, when palm oil prices are higher, part of the supply could be diverted to exports. "Biofuel policy should be applied more flexibly," he said.

The concern: shrinking room for exports

GAPKI notes that national CPO production has ranged between 51 and 56 million tonnes over the past five years. Meanwhile, CPO demand for biodiesel keeps rising: around 12.4 million tonnes in 2025, more than 14 million tonnes in 2026, and a projected 17 million tonnes in 2027. As a result, the volume available for export could shrink by 3–4 million tonnes in 2027.

The issue goes beyond the trade balance. Biodiesel incentives for the subsidised (PSO) segment are not funded from the state budget (APBN) but from palm oil export levies managed by the Plantation Fund Management Agency (BPDP). In other words, if exports fall, the funding that underpins the biodiesel programme comes under pressure too—a dilemma we also highlighted in our review of the benefits and challenges of the biodiesel programme.

July data: biodiesel props up consumption

GAPKI data for July 2026, as reported by InfoSAWIT, show biodiesel playing an increasingly dominant role in the domestic market:

Indicator (July 2026)	Volume	Change vs June
Total domestic consumption	2.275 million tonnes	+3.35%
— Biodiesel	1.285 million tonnes	+13.59%
— Food	805,000 tonnes	−8.31%
— Oleochemicals	185,000 tonnes	−3.65%
CPO + PKO production	5.370 million tonnes	+1.87%
Palm oil product exports	3.188 million tonnes	−2.67%
End-July stocks	2.758 million tonnes	—

On a cumulative basis, domestic consumption in January–July 2026 reached 15.219 million tonnes, up 6.38% from the same period last year. Consumption for biodiesel stood at 7.857 million tonnes, up from 7.232 million tonnes. Mukti said the rise in consumption in July was driven mainly by biodiesel demand—in line with the start of the B50 biodiesel mandate on 1 July 2026.

Editor's note

GAPKI's proposal touches on a fundamental question for the biodiesel programme: should the mandate stay rigid to guarantee energy security, or flex with prices to protect export earnings and funding? With B50 now supplied at all fuel stations and B60 under study, this debate will only become more relevant. Media Biodiesel will follow the government's response to the proposal.