Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry participants seeking phase-in period expect progressive intro

Industry deals with technical obstacles and expense issues

Government financing problems emerge due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually sustained issues it could curb international palm oil materials, looks significantly likely to be carried out gradually, experts stated, as market participants seek a phase-in duration.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the necessary 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 even more in 2025.

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

Indonesia's biggest fuel seller, state-owned Pertamina, said it requires to customize some of its fuel terminals to mix and keep B40, which will be completed throughout a "transition period after government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with government officials and biodiesel producers last week, fuel merchants requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not immediately react to a demand for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be executed gradually, and that biodiesel manufacturers are all set to provide the higher blend.

"I have actually validated 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, said the federal government has not issued allocations for manufacturers to offer to fuel merchants, which it generally has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend could likewise be an obstacle as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes profits from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% increase 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 walking is imminent.

However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the market, including palm smallholders.

"I believe there will be a delay, because if it is executed, the aid will increase. Where will (the money) originate from?" he stated.

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

"The application may be slow and progressive in 2025 and probably more busy in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more 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.)