Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry individuals looking for phase-in period expect steady introduction

Industry faces technical obstacles and expense issues

Government funding issues arise 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 global palm oil materials, looks significantly most likely to be executed slowly, analysts said, as industry individuals look for a phase-in duration.

Indonesia, the world’s greatest producer 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 activated a jump in palm futures and may press prices further in 2025.

While the government of President Prabowo Subianto has said consistently the plan is on track for full launch in the new year, market watchers say costs and technical obstacles are likely to result in partial implementation before complete adoption throughout the stretching archipelago.

Indonesia’s biggest fuel retailer, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and keep B40, which will be completed throughout a “transition duration after federal government develops the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without offering details.

During a meeting with government authorities and biodiesel producers recently, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out slowly, which biodiesel producers are all set to provide the higher mix.

“I have validated the preparedness with all manufacturers recently,” she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has actually not provided allocations for manufacturers to offer to fuel retailers, which it normally has done by this time of the year.

“We can’t deliver the goods without purchase order files, and order documents are gotten after we get contracts with fuel companies,” Gunawan told Reuters. “Fuel companies can only 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 initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix might also be an obstacle as palm oil now costs around $400 per metric load more than petroleum. earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed 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 is imminent.

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, consisting of palm smallholders.

“I believe there will be a delay, because if it is implemented, the aid will increase. Where will (the money) originate from?” he stated.

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

“The implementation might be slow and progressive 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)