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Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry individuals looking for phase-in duration expect steady intro

Industry deals with technical challenges and cost concerns

Government funding issues occur due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to expand its biodiesel required from Jan. 1, which has fuelled issues it could curb global palm oil supplies, looks significantly likely to be executed gradually, analysts said, as industry participants look for a phase-in period.

Indonesia, the world’s biggest manufacturer and exporter of palm oil, prepares to raise the mandatory 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 push prices even more in 2025.

While the federal government of President Prabowo Subianto has actually said consistently the strategy is on track for complete launch in the new year, industry watchers say costs and technical challenges are most likely to lead to partial implementation before complete adoption across the sprawling island chain.

Indonesia’s greatest fuel seller, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and keep B40, which will be completed throughout a “transition period after government establishes the mandate”, spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with federal government authorities and biodiesel producers last week, fuel merchants requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out gradually, which biodiesel producers are prepared to provide the greater blend.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not released allowances for producers to sell to fuel merchants, which it normally has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, the higher mix could also be a difficulty as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia uses profits from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% boost in aids 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 is impending.

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

“I believe there will be a delay, since if it is carried out, the subsidy will increase. Where will (the cash) come from?” he stated.

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

“The execution might be slow and progressive in 2025 and probably more hectic in 2026,” he stated.

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