Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia firmly insists B40 biodiesel implementation to continue on Jan. 1

Industry individuals looking for phase-in period anticipate progressive introduction

Industry deals with technical obstacles and cost concerns

Government funding concerns arise due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) plan to expand its biodiesel required from Jan. 1, which has sustained concerns it could curb worldwide palm oil products, looks significantly most likely to be implemented slowly, experts said, as market individuals seek a phase-in duration.

Indonesia, the world’s most significant manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has triggered a jump in palm futures and might pressure prices further in 2025.

While the federal government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the new year, market watchers state costs and technical obstacles are likely to lead to partial execution before full adoption throughout the stretching island chain.

Indonesia’s biggest fuel merchant, state-owned Pertamina, said it needs to customize a few of its fuel terminals to mix and save B40, which will be completed throughout a “transition duration after federal government establishes the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

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

Hiswana Migas, the fuel retailers’ association, did not immediately react to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be implemented slowly, which biodiesel manufacturers are all set to supply the greater blend.

“I have actually validated the preparedness with all manufacturers recently,” she stated.

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

“We can’t provide the products without order files, and order documents are acquired after we get agreements with fuel business,” Gunawan informed Reuters. “Fuel companies can just 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 preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the higher mix might likewise be a difficulty as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes earnings 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 subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking looms.

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

“I believe there will be a hold-up, since if it is executed, the aid will increase. Where will (the money) originate from?” he said.

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

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

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to accomplish 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.)