Indonesia collects levies from palm oil exports to fund the cost difference between fuel made from palm oil and fossil diesel fuel as incentives for producers.
However, a sharp drop in crude oil prices this year has widened the price difference between the two fuels.
"In 2021, we predict that the situation will be similar to 2020 where the price of biofuels will be higher than the fossil fuels," Febrio Kacaribu, head of Finance Ministry's fiscal policy office, said on Wednesday at seminar streamed online.
He said the levy collection may have to increase while the government formulates a more comprehensive policy to achieve its bioenergy goals.
The government was not ready yet to disclose details of the plan, he said.
The world's top palm oil producer raised its levy on crude palm oil exports in June to $55 per tonne and the government has pledged 2.78 trillion rupiah financial assistance for the programme.
The content of palm oil-based fuel in the biodiesel mix was expanded to 30% late last year from 20%, to absorb more of the country's production of the vegetable oil and slash diesel fuel imports.
Indonesia's chief economic minister, Airlangga Hartarto, said last month that he was targeting expansion of the palm oil content to 40% by July next year.
(Reporting by Fransiska Nangoy and Gayatri Suroyo; Editing by Martin Petty)