Indonesia insists B40 biodiesel implementation to continue on Jan. 1

Industry participants looking for phase-in period expect progressive introduction

Industry faces technical challenges and cost concerns

Government funding concerns occur due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has sustained concerns it could suppress worldwide palm oil products, looks increasingly most likely to be executed slowly, analysts said, as market individuals look for a phase-in period.

Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a jump in palm futures and might press costs further in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the brand-new year, industry watchers say expenses and technical obstacles are likely to lead to partial application before complete adoption across the stretching island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it requires to modify a few of its fuel terminals to blend and save B40, which will be completed during a "transition duration after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with federal government officials and biodiesel manufacturers recently, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not right away respond to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be executed slowly, which biodiesel manufacturers are ready to provide the greater blend.

"I have verified the readiness with all manufacturers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the federal government has actually not released allowances for producers to sell to fuel merchants, which it typically has actually done by this time of the year.

"We can't perform without purchase order documents, and purchase order documents are obtained after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can only sign contracts after the ministerial decree (on biodiesel allotments)."

The federal government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its preliminary quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher blend could also be a challenge as palm oil now costs around $400 per metric ton more than . Indonesia utilizes earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.

However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I think there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the cash) come from?" he said.

Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, said B40 execution would be challenging in 2025.

"The implementation may be slow and steady in 2025 and most likely more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina