Indonesia insists B40 biodiesel implementation to continue on Jan. 1

Industry participants looking for phase-in duration expect steady introduction

Industry deals with technical challenges and cost concerns

Government funding problems occur due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it might curb international palm oil materials, looks significantly most likely to be carried out slowly, experts said, as industry individuals seek a phase-in period.

Indonesia, the world's most significant 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 actually activated a jump in palm futures and may press costs further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the brand-new year, industry watchers state expenses and technical challenges are most likely to lead to partial application before full adoption across the sprawling archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, said it requires to customize some of its fuel terminals to blend and store B40, which will be finished throughout a "transition period after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a meeting with government officials and biodiesel manufacturers last week, fuel sellers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.

Hiswana Migas, the fuel sellers' association, did not instantly respond to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be executed slowly, and that biodiesel manufacturers are ready to provide the higher blend.

"I have confirmed 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 government has actually not issued allowances for manufacturers to sell to sustain merchants, which it generally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the higher mix might also be a challenge as palm oil now costs around $400 per metric load more than crude oil. Indonesia uses profits from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

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, sustaining market speculation that a levy walking impends.

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

"I think there will be a hold-up, since if it is carried out, the aid will increase. Where will (the money) originate from?" he said.

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

"The implementation may be slow and steady 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 achieve energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)