Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants seeking phase-in duration expect steady intro

Industry deals with technical obstacles and expense issues

Government funding concerns occur due to palm oil cost disparity

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

Indonesia, the world’s most significant manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has set off a dive in palm futures and might press rates even more in 2025.

While the federal government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the brand-new year, industry watchers say expenses and technical difficulties are likely to result in partial execution before full adoption across the sprawling island chain.

Indonesia’s most significant fuel retailer, state-owned Pertamina, said it needs to customize some of its fuel terminals to mix and store B40, which will be completed during a “shift period after federal government establishes the required”, spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with federal government authorities and biodiesel manufacturers recently, fuel retailers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in attendance, informed Reuters.

Hiswana Migas, the fuel retailers’ association, did not right away react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be carried out slowly, and that biodiesel manufacturers are ready to provide the higher mix.

“I have confirmed the readiness with all manufacturers last week,” she stated.

APROBI, whose members make fat 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 generally has actually done by this time of the year.

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

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

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 is imminent.

However, the palm oil industry would object to a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

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

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

“The implementation might be slow and gradual in 2025 and probably more busy in 2026,” he said.

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