Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry individuals seeking phase-in duration expect progressive intro

Industry deals with technical challenges and expense issues

Government financing concerns emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to broaden its biodiesel required from Jan. 1, which has sustained issues it could curb global palm oil products, looks significantly most likely to be executed gradually, experts stated, as market individuals look for a phase-in duration.

Indonesia, the world’s biggest manufacturer and of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and might pressure rates further in 2025.

While the government of President Prabowo Subianto has stated consistently the plan is on track for complete launch in the brand-new year, market watchers say costs and technical obstacles are most likely to lead to partial execution before full adoption throughout the stretching archipelago.

Indonesia’s biggest fuel merchant, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and store B40, which will be completed during a “transition duration after government develops the required”, representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with federal government authorities and biodiesel manufacturers last week, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel retailers’ association, did not right away react to a request for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented gradually, which biodiesel producers are all set to supply the greater blend.

"I have validated the preparedness with all manufacturers recently,” she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not released allowances for manufacturers to offer to fuel merchants, which it generally has done by this time of the year.

"We can’t provide the goods without order files, and order files are obtained after we get contracts with fuel companies,” Gunawan told Reuters. “Fuel business can just sign agreements after the ministerial decree (on biodiesel allowances).“

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

FUNDING CHALLENGES

For the federal government, moneying the greater blend might also be a challenge as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses earnings from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking impends.

However, the palm oil industry would challenge a levy walking, stated 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) originate from?” he said.

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

"The application might be sluggish and steady in 2025 and most likely more busy in 2026,” he stated.

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