Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry individuals seeking expect gradual introduction

Industry deals with technical obstacles and expense concerns

Government financing problems emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could curb global palm oil materials, looks increasingly likely to be executed slowly, experts said, as industry participants look for a phase-in period.

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 dive in palm futures and may push prices further in 2025.

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

Indonesia's greatest fuel seller, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and store B40, which will be completed during a "shift period after federal government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without providing information.

During a meeting with government officials and biodiesel producers recently, fuel retailers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not immediately react to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be implemented gradually, which biodiesel producers are ready to supply the greater blend.

"I have verified the preparedness with all manufacturers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the federal government has actually not issued allowances for producers to offer to sustain retailers, which it typically has actually done by this time of the year.

"We can't provide the items without purchase order files, and purchase order files are gotten after we get contracts with fuel business," Gunawan informed Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allotments)."

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

FUNDING CHALLENGES

For the federal government, moneying the greater mix might also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses profits from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking impends.

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

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

"The execution may be slow and gradual in 2025 and probably more busy in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina