Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in duration expect progressive intro

Industry deals with technical difficulties and expense concerns

Government financing issues emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has sustained concerns it might suppress global palm oil supplies, looks increasingly most likely to be implemented gradually, analysts said, as market individuals seek a phase-in period.

Indonesia, the world's greatest producer 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 actually set off a jump in palm futures and may pressure prices further in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the is on track for full launch in the new year, industry watchers say expenses and technical challenges are most likely to lead to partial implementation before full adoption throughout the stretching island chain.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to mix and keep B40, which will be finished during a "transition duration after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

During a conference with government officials and biodiesel producers last week, fuel merchants asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, told Reuters.

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out slowly, and that biodiesel manufacturers are prepared to provide the higher blend.

"I have actually confirmed the readiness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not provided allotments for producers to sell to sustain merchants, 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 agreements with fuel companies," Gunawan told Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allotments)."

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend could also be a difficulty as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

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, sustaining market speculation that a levy walking impends.

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

"I believe there will be a delay, because if it is implemented, the subsidy will increase. Where will (the money) come from?" he stated.

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

"The execution may be sluggish and steady in 2025 and most likely more busy 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 accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina