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

Industry participants looking for phase-in duration anticipate steady introduction

Industry deals with technical difficulties and cost issues

Government financing issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has actually sustained issues it might curb international palm oil products, looks progressively likely to be carried out slowly, experts stated, as market participants look for a phase-in duration.

Indonesia, the world's most significant manufacturer and exporter of palm oil, plans to raise the obligatory 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 may pressure costs further in 2025.

While the government of President Prabowo Subianto has stated consistently the strategy is on track for full launch in the brand-new year, industry watchers state costs and technical obstacles are most likely to result in partial execution before complete adoption across the stretching archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and save B40, which will be completed throughout a "transition duration after government develops the required", spokesperson Fadjar informed Reuters, without supplying information.

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

Hiswana Migas, the fuel merchants' association, did not right away react to a demand for remark.

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

"I have verified the preparedness with all producers last week," she stated.

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

"We can't provide the goods without order documents, and purchase order documents are acquired after we get agreements with fuel companies," Gunawan told Reuters. "Fuel business can just sign agreements after the ministerial decree (on biodiesel allowances)."

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

FUNDING CHALLENGES

For the federal government, funding the greater blend might also be an obstacle as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia uses profits from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed a 68% boost in aids 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 impends.

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

"I believe there will be a hold-up, because if it is carried out, the aid will increase. Where will (the cash) originate from?" he stated.

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

"The execution may be slow and gradual in 2025 and probably more hectic in 2026," he stated.

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