Biodiesel allotment decree was waited for by market

Indonesia had planned to launch higher biodiesel mix on Jan. 1

Palm oil standard contract increased 1% after previous fall

Government aims for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while providing the industry until completion of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually prepared to release the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia informed press reporters, adding the government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel retailers will be offered till Feb. 28 to adapt to the B40 mix. She said the hold-up was since of technical obstacles connected to aids for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil criteria contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel producers had said they were not able to prepare agreements for biodiesel circulation without the decree.

The biodiesel allocation for 2025 showed a boost from 2024's estimated biodiesel consumption of 12.98 KL, ministry information revealed on Friday.

Of the overall allowance for this year, 7.55 million KL is for the public service responsibility (PSO), which covers sectors such as public transportation, whose sales will be subsidised by the country's palm oil fund.

"The remaining allowances will be cost market price. The non-PSO allotment is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the cost gap in between the palm oil and fossil fuels for the general allotment.

BPDPKS, the company in charge of collecting and managing the palm oil funds, approximated in November B40 would need a 68% subsidy increase.

To help fund that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, however for that to occur, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)