Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry participants seeking phase-in period anticipate gradual introduction

Industry faces technical obstacles and expense issues

Government financing concerns arise due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to broaden its biodiesel mandate from Jan. 1, which has sustained concerns it might suppress worldwide palm oil materials, looks increasingly most likely to be implemented slowly, experts stated, as market individuals look for a phase-in duration.

Indonesia, the world’s greatest 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 triggered a dive in palm futures and might press prices even more in 2025.

While the 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 challenges are likely to lead to partial execution before full adoption throughout the sprawling island chain.

Indonesia’s greatest fuel seller, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and save B40, which will be completed throughout a “shift duration after government develops the required”, representative Fadjar Djoko Santoso informed Reuters, without providing details.

During a conference with federal government officials and biodiesel producers recently, fuel sellers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, informed Reuters.

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

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

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

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

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

The prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the higher blend could also be an obstacle as palm oil now costs around $400 per metric lot more than crude oil. Indonesia uses proceeds 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 subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.

However, the palm oil market would challenge a levy walking, said 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 delay, due to the fact that if it is executed, the subsidy will increase. Where will (the cash) originate from?” he stated.

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

“The application might be sluggish and progressive in 2025 and probably more fast-paced in 2026,” he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to attain 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.)