Indonesia firmly insists B40 biodiesel application to continue on Jan. 1

Industry participants seeking phase-in duration anticipate gradual introduction

Industry faces technical difficulties and expense concerns

Government funding concerns arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it could suppress international palm oil materials, looks significantly likely to be implemented slowly, analysts said, as industry individuals seek a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, plans to raise the obligatory 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 prices further in 2025.

While the government of President Prabowo Subianto has said repeatedly the strategy is on track for complete launch in the brand-new year, market watchers state expenses and technical challenges are likely to result in partial implementation before complete adoption throughout the stretching archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and store B40, which will be finished during a "shift duration after government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

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

Hiswana Migas, the fuel sellers' association, did not immediately react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be executed gradually, and that biodiesel producers are ready to supply the higher blend.

"I have actually confirmed the preparedness with all producers recently," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not provided allowances for producers to sell to sustain sellers, which it normally has actually done by this time of the year.

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

The federal government plans to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the greater blend might likewise be a difficulty as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

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, sustaining market speculation that a levy hike looms.

However, the palm oil market would object to a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the market, including palm smallholders.

"I think there will be a delay, since if it is executed, the subsidy will increase. Where will (the cash) come from?" he said.

Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 execution would be challenging in 2025.

"The application might be slow and steady in 2025 and probably 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 accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)