Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry individuals looking for phase-in duration expect progressive introduction

Industry faces technical difficulties and cost concerns

Government funding problems develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it could suppress international palm oil products, looks progressively most likely to be executed gradually, stated, as market individuals seek a phase-in period.

Indonesia, the world’s biggest 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 set off a jump in palm futures and may press prices even more in 2025.

While the federal government of President Prabowo Subianto has actually said consistently the plan is on track for full launch in the new year, market watchers state expenses and technical difficulties are most likely to result in partial implementation before complete adoption throughout the stretching island chain.

Indonesia’s biggest fuel seller, state-owned Pertamina, stated it requires to modify some of its fuel terminals to mix and save B40, which will be completed during a “transition duration after federal government establishes the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without offering details.

During a meeting with federal government authorities and biodiesel manufacturers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, informed 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 walking would not be implemented gradually, and that biodiesel manufacturers are ready to provide the higher mix.

“I have actually verified the readiness with all producers last week,” she stated.

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

“We can’t provide the goods without purchase order files, and order documents are gotten after we get agreements with fuel companies,” Gunawan informed Reuters. “Fuel companies can only sign agreements after the ministerial decree (on biodiesel allocations).”

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 federal government, funding the greater mix might also be a difficulty as palm oil now costs around $400 per metric lot 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 approximated it required a 68% boost in aids 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 analyst with think-tank INDEF, as it would injure the market, consisting of palm smallholders.

“I think there will be a hold-up, due to the fact that if it is carried out, the aid will increase. Where will (the money) originate from?” he stated.

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

“The implementation may be sluggish and steady in 2025 and probably more hectic in 2026,” he stated.

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