Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals looking for phase-in duration anticipate progressive intro

Industry deals with technical difficulties and cost issues

concerns arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it might suppress global palm oil products, looks increasingly most likely to be executed gradually, experts said, as industry participants seek a phase-in duration.

Indonesia, the world's greatest producer 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 triggered a jump in palm futures and might push prices further in 2025.

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

Indonesia's greatest fuel seller, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and store B40, which will be finished throughout a "shift duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with federal government authorities and biodiesel producers last week, fuel merchants asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be implemented gradually, which biodiesel producers are all set to supply the higher mix.

"I have actually validated the preparedness with all producers last week," 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 released allowances for producers to offer to sustain merchants, which it typically has done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, funding the higher blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated 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, sustaining market speculation that a levy walking is impending.

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

"I believe there will be a delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he said.

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

"The implementation might be slow 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 required 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