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

Industry individuals looking for phase-in period expect progressive intro

Industry deals with technical obstacles and expense issues

Government funding problems arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has fuelled concerns it could suppress international palm oil supplies, looks progressively most likely to be executed gradually, experts stated, as industry participants seek a phase-in duration.

Indonesia, the world's most significant 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 activated a jump in palm futures and might push rates further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for complete launch in the brand-new year, market watchers state costs and technical difficulties are most likely to result in partial application before full adoption across the sprawling archipelago.

Indonesia's greatest fuel seller, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and store B40, which will be completed during a "shift period after government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with federal government officials 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 attendance, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not instantly react to a request for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be implemented slowly, which biodiesel producers are ready to supply the greater blend.

"I have validated the readiness with all producers recently," she stated.

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

"We can't perform without purchase order files, and order documents are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can just sign agreements after the ministerial decree (on biodiesel allowances)."

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

FUNDING CHALLENGES

For the federal government, funding the higher blend might also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking looms.

However, the palm oil market would challenge a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.

"I think there will be a hold-up, since if it is implemented, the subsidy will increase. Where will (the cash) come from?" he stated.

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

"The application may be sluggish and gradual in 2025 and probably more hectic in 2026," he stated.

Prabowo, who took workplace 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.)