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Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia firmly insists B40 biodiesel execution to proceed on Jan. 1

Industry participants looking for phase-in period anticipate progressive intro

Industry deals with technical challenges and cost concerns

Government financing issues emerge due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to broaden its biodiesel required from Jan. 1, which has actually fuelled concerns it could curb international palm oil supplies, looks progressively likely to be executed slowly, analysts said, as market individuals seek a phase-in period.

Indonesia, the world’s biggest 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 set off a jump in palm futures and might pressure costs further in 2025.

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

Indonesia’s most significant fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and save B40, which will be finished throughout a “transition duration after government establishes the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with government officials and biodiesel manufacturers recently, fuel retailers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, told Reuters.

Hiswana Migas, the fuel sellers’ association, did not instantly react to a demand for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out slowly, which biodiesel producers are ready to supply the greater mix.

“I have verified the readiness with all manufacturers recently,” she stated.

APROBI, whose members make methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has not issued allocations for manufacturers to sell to fuel merchants, which it typically has done by this time of the year.

“We can’t perform without order documents, and order files are gotten after we get agreements with fuel companies,” Gunawan told Reuters. “Fuel business can only sign contracts after the ministerial decree (on biodiesel allocations).”

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

FUNDING CHALLENGES

For the government, funding the greater blend could also be a challenge as palm oil now costs around $400 per metric lot more than crude oil. Indonesia uses earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

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

However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.

“I think there will be a delay, because if it is implemented, the aid will increase. Where will (the cash) originate from?” he stated.

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

“The execution might be slow and gradual in 2025 and most likely more busy in 2026,” he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)