THE odds that the NSW teenager incarcerated in Bali after allegedly buying cannabis will avoid a prison term and return to Australia have improved markedly. Indonesian police said they were considering him a drug user in need of rehabilitation, rather than a criminal.

The breakthrough came after intense efforts by Australian diplomats appeared to be paying dividends on other fronts. The Indonesian welfare officer who is preparing a crucial report on the case will base his recommendations on representations from the Australian consulate in Bali.

The report by the officer, from the welfare arm of Indonesia's corrections department, BAPAS, is part of the dossier that will go to court, where the crucial decision about the schoolboy's ''addict'' defence under article 128 of the country's drug laws is expected to be made.

Speaking yesterday, the head of Bali police's narcotics division, Senior Commissioner Mulyadi, said: ''We will use article 128. It is the most appropriate [article] since he's a minor and a user.''

The article stipulates the parents must be able to show they have reported any known drug use by the boy to a counsellor, doctor or relevant authorities. It is understood evidence that the parents raised the matter with the appropriate authorities will arrive in Bali shortly.