Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants seeking phase-in duration expect steady introduction

Industry deals with technical challenges and cost concerns

Government funding problems develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually fuelled concerns it could curb global palm oil supplies, looks progressively most likely to be carried out gradually, experts stated, as market individuals look for a phase-in duration.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a jump in palm futures and might press costs further in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for complete launch in the brand-new year, market watchers say costs and technical difficulties are likely to lead to partial application before complete throughout the stretching island chain.

Indonesia's most significant fuel merchant, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and store B40, which will be finished during a "shift duration after government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with government authorities and biodiesel manufacturers last week, fuel retailers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, told Reuters.

Hiswana Migas, the fuel merchants' association, did not right away respond to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be executed gradually, which biodiesel producers are ready to provide the greater mix.

"I have actually verified the readiness with all producers last week," she said.

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

"We can't perform without order files, and purchase order files are obtained after we get agreements with fuel companies," Gunawan told Reuters. "Fuel companies 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 told Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the higher mix might likewise be a challenge as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia utilizes profits from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

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

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, consisting of 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 said.

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

"The execution might be sluggish and gradual in 2025 and most likely more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required further 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; Editing by Tony Munroe and Lincoln Feast.)