Pertamina Patra Niaga, the commercial and trading arm of Indonesia's state-owned energy company Pertamina, is seeking an excise exemption for imported fuel-grade ethanol as the government prepares to mandate ethanol-blended petrol within the next two years.

The state fuel retailer said the exemption would help maintain the cost of ethanol-blended petrol as the government implements its mandatory blending roadmap.

"Together with the Energy and Mineral Resources Ministry and other agencies, we are seeking support for an excise exemption for fuel-based ethanol," Pertamina Patra Niaga retail marketing director Eko Ricky Susanto said on September 11th.

Current excise rules treat fuel-grade ethanol in the same manner as ethanol used by the food and beverage industries, according to Eko.

"Because this is for the energy transition and energy shifting, we have proposed to the ministry that it be supported with an excise exemption, and this is currently being processed," he said.

Pertamina is meanwhile preparing terminals, storage tanks and blending systems to handle bioethanol, with the initial infrastructure focusing on Java, where domestic production is currently centred in Mojokerto, East Java. In addition to imported ethanol, domestic production is also expected to expand, with three to four new ethanol plants planned for construction in the near future, he added.

President Prabowo Subianto's administration is pursuing the use of biofuels to diversify the fuel mix, reduce imports and increase domestic energy supply. Palm oil is used for biodiesel blends, while sugarcane- and cassava-derived molasses are used to produce bioethanol for blending into petrol.

However, ethanol supply constraints have delayed plans to increase the mandatory bioethanol content in petrol. Existing bioethanol supplies can cover only about 3 percent of national demand for biofuel applications, according to data from the Investment and Downstream Ministry.

Indonesia can produce about 300,000 kilolitres of ethanol annually, but only around 70,000 kL is currently suitable for use as biofuel, according to the Institute for Essential Services Reform (IESR) think tank.

Pertamina Patra Niaga currently markets Pertamax Green 95, a petrol brand containing 5 percent ethanol. However, a planned mandatory E5 blend in July was postponed after domestic production proved insufficient to meet the requirements.

The E5 initiative builds on a programme launched by former president Joko "Jokowi" Widodo in 2022, when he inaugurated a sugarcane-based bioethanol programme targeting a gradual increase to a 20 percent blend. The country continues to face supply-side challenges, including a sugar deficit that has persisted for decades. The government has proposed nearly doubling state-run sugarcane plantations to 700,000 hectares.

Meanwhile, the government is preparing to introduce a mandatory 10 percent bioethanol blend in petrol (E10) in 2027, rising to a 20 percent blend (E20) in 2028, according to the government's roadmap. E20 is expected to require about 1.39 million kL of ethanol annually.