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

Industry participants looking for phase-in duration anticipate gradual introduction

Industry faces technical obstacles and expense concerns

Government funding issues emerge due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to broaden its biodiesel mandate from Jan. 1, which has fuelled concerns it might curb international palm oil materials, looks significantly likely to be implemented slowly, experts stated, as industry participants seek a phase-in period.

Indonesia, the world’s most significant manufacturer and exporter of palm oil, plans 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 press prices even more in 2025.

While the federal government of President Prabowo Subianto has stated consistently the strategy is on track for full launch in the new year, industry watchers say expenses and technical difficulties are most likely to result in partial execution before complete adoption throughout the stretching archipelago.

Indonesia’s most significant fuel retailer, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and store B40, which will be completed throughout a “transition duration after government establishes the mandate”, representative Fadjar Djoko Santoso told Reuters, without offering information.

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

Hiswana Migas, the fuel sellers’ association, did not right away react to a request for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be carried out slowly, which biodiesel manufacturers are all set to supply the higher mix.

“I have actually validated the readiness with all producers last week,” she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has not released allocations for manufacturers to sell to fuel merchants, which it normally has done by this time of the year.

“We can’t perform without 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 allowances).”

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

CHALLENGES

For the federal government, funding the greater mix could also be an obstacle as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses profits from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS approximated 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 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 hurt the industry, including palm smallholders.

“I believe there will be a hold-up, because if it is executed, the aid will increase. Where will (the cash) originate from?” he stated.

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

“The execution might be sluggish and steady in 2025 and most likely more hectic in 2026,” he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the required 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