Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in duration anticipate steady intro

Industry faces technical difficulties and expense issues

Government funding concerns occur due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has sustained concerns it could suppress worldwide palm oil supplies, looks increasingly likely to be executed gradually, analysts said, as market participants look for a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and might press costs further in 2025.

While the government of President Prabowo Subianto has stated repeatedly the plan is on track for complete launch in the new year, industry watchers state expenses and technical challenges are most likely to lead to partial execution before complete adoption throughout the stretching island chain.

Indonesia's greatest fuel retailer, state-owned Pertamina, said it requires to modify some of its fuel terminals to mix and save B40, which will be completed during a "transition period after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with government authorities and biodiesel manufacturers recently, fuel merchants asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to a demand for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be executed gradually, which biodiesel manufacturers are prepared to supply the higher blend.

"I have actually validated the preparedness with all manufacturers last week," she said.

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

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

The federal government prepares to designate 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 a difficulty as palm oil now costs around $400 per metric load more than petroleum. uses proceeds from palm oil export levies, handled by a firm 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, sustaining market speculation that a levy walking impends.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, including palm smallholders.

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

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

"The application might be slow and progressive in 2025 and probably more fast-paced in 2026," he said.

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