Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry individuals seeking phase-in duration expect progressive intro

Industry deals with technical challenges and expense issues

Government funding issues occur due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to expand its from Jan. 1, which has actually fuelled issues it might curb worldwide palm oil products, looks increasingly likely to be carried out gradually, analysts said, as industry participants seek a phase-in period.

Indonesia, the world’s greatest producer 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 set off a dive in palm futures and might pressure prices further in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the plan is on track for complete launch in the new year, industry watchers say costs and technical difficulties are most likely to result in partial implementation before full adoption throughout the sprawling archipelago.

Indonesia’s most significant fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and store B40, which will be finished throughout a «shift duration after federal government develops the required», spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a conference with government officials and biodiesel manufacturers last week, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, told Reuters.

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be carried out slowly, which biodiesel producers are prepared to supply the higher blend.

«I have actually verified the readiness with all producers recently,» she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has actually not provided allocations for producers to sell to fuel retailers, which it generally has actually done by this time of the year.

«We can’t perform without purchase order documents, and order files are obtained after we get contracts with fuel business,» Gunawan informed Reuters. «Fuel companies can just sign agreements after the ministerial decree (on biodiesel allocations).»

The government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend might likewise be a challenge as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes earnings from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% increase 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 walking looms.

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

«I believe there will be a hold-up, due to the fact that if it is implemented, the aid will increase. Where will (the money) originate from?» he said.

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

«The application may be slow and steady in 2025 and probably more fast-paced in 2026,» he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to attain 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.)