Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants seeking phase-in duration anticipate steady introduction

Industry faces technical difficulties and expense concerns

Government financing concerns arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled issues it might curb global palm oil supplies, looks increasingly most likely to be executed gradually, experts said, as market individuals look for a phase-in duration.

Indonesia, the world's biggest producer 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 set off a jump in palm futures and might press rates even more in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for complete launch in the brand-new year, industry watchers say expenses and technical obstacles are likely to result in partial execution before full adoption across the stretching island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to modify some of its fuel terminals to blend and keep B40, which will be completed during a "transition duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with federal government authorities and biodiesel producers last week, fuel sellers requested 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 right away react to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be carried out gradually, and that biodiesel producers are prepared to supply the higher blend.

"I have confirmed the readiness with all producers recently," she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not provided allocations for manufacturers to offer to sustain merchants, which it normally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the greater blend might likewise be an obstacle 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 required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike is imminent.

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the industry, including palm smallholders.

"I believe there will be a delay, due to the fact that if it is executed, the subsidy will increase. Where will (the money) come from?" he stated.

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

"The execution may be slow and progressive in 2025 and most likely more busy 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 self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina