Indonesia insists B40 biodiesel implementation to continue on Jan. 1

Industry individuals looking for phase-in duration anticipate steady intro

Industry faces technical obstacles and expense issues

Government financing problems arise due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has sustained concerns it might suppress global palm oil products, looks significantly most likely to be carried out gradually, analysts stated, as market participants seek a phase-in duration.

Indonesia, the world's most significant manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and might press costs even more in 2025.

While the government of President Prabowo Subianto has 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 result in partial implementation before complete adoption across the sprawling island chain.

Indonesia's biggest fuel seller, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and save B40, which will be completed throughout a "transition duration after federal government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with federal government authorities and biodiesel producers 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 instantly react to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be implemented gradually, and that biodiesel producers are prepared to supply the greater mix.

"I have validated the preparedness with all manufacturers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not released allotments for producers to offer to sustain retailers, which it usually has actually done by this time of the year.

"We can't deliver the items without purchase order documents, and purchase order files are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allowances)."

The government prepares 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 federal government, moneying the higher mix could likewise be a difficulty as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

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

However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.

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

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

"The execution may be slow and progressive in 2025 and probably more fast-paced in 2026," he said.

Prabowo, who took workplace 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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)