Biodiesel allotment decree was awaited by market

Indonesia had prepared to release higher biodiesel mix on Jan. 1

Palm oil benchmark agreement rose 1% after previous fall

Government intends 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while providing the market up until completion of next month to adapt to the greater level of the fuel in the mix.

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

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

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel retailers will be given till Feb. 28 to adapt to the B40 mix. She said the hold-up was because of technical challenges linked to subsidies for the fuel.

The non-implementation on Jan. 1. had caused a 2.6% drop in the Malaysian palm oil criteria contract on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel manufacturers had actually stated they were unable to prepare agreements for biodiesel circulation without the decree.

The biodiesel allocation for 2025 showed an increase from 2024's approximated biodiesel intake of 12.98 KL, ministry data showed on Friday.

Of the overall allocation 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 country's palm oil fund.

"The remaining allocations will be sold at market cost. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the rate space in between the palm oil and nonrenewable fuel sources for the total allowance.

BPDPKS, the firm in charge of collecting and managing the palm oil funds, estimated in November B40 would need a 68% subsidy boost.

To assist finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the current 7.5%, but for that to occur, another main regulation is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)