Biodiesel allocation decree was waited for by market

Indonesia had planned to release greater biodiesel mix on Jan. 1

Palm oil standard agreement increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry till the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to introduce the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has been signed," the minister Bahlil Lahadalia told press reporters, adding the federal government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel merchants will be given up until Feb. 28 to adjust to the B40 mix. She said the hold-up was due to the fact that of technical challenges connected to subsidies for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel sellers and biodiesel producers had actually stated they were not able to draw up contracts for biodiesel circulation without the decree.

The biodiesel allowance for 2025 showed a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

Of the total allowance for this year, 7.55 million KL is for the public service obligation (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allowances will be cost market rate. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the cost gap between the palm oil and fossil fuels for the general allocation.

BPDPKS, the firm in charge of collecting and handling the palm oil funds, approximated in November B40 would require a 68% aid increase.

To assist fund that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the present 7.5%, however for that to happen, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)