Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry participants seeking phase-in period expect steady introduction

Industry faces technical challenges and cost concerns

Government funding problems develop 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 concerns it might curb worldwide palm oil materials, looks progressively most likely to be carried out gradually, experts said, as market individuals seek a phase-in duration.

Indonesia, the world’s greatest 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 activated a jump in palm futures and might press costs further in 2025.

While the federal government of President Prabowo Subianto has stated consistently the plan is on track for complete launch in the new year, industry watchers state costs and technical challenges are most likely to result in partial application before complete adoption throughout the sprawling island chain.

Indonesia’s biggest fuel seller, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and keep B40, which will be completed throughout a “transition period after government establishes the mandate”, representative Fadjar Djoko Santoso told Reuters, without providing information.

During a meeting with federal government officials and biodiesel producers recently, fuel sellers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel merchants’ association, did not instantly react to a request for remark.

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

“I have actually validated the readiness with all manufacturers last week,” she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not released allowances for producers to sell to sustain sellers, which it typically has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, funding the higher blend might also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses earnings from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required 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 walking impends.

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

“I believe there will be a delay, because if it is carried out, the aid will increase. Where will (the money) originate from?” he said.

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

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

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)