Biodiesel allowance decree was waited for by market

Indonesia had planned to introduce higher biodiesel mix on Jan. 1

Palm oil benchmark 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the industry till the end of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to release the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has actually been signed," the minister Bahlil Lahadalia told reporters, including the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel retailers will be given until Feb. 28 to adjust to the B40 mix. She said the delay was due to the fact that of technical obstacles linked to aids for the fuel.

The non-implementation on Jan. 1. had actually caused a 2.6% drop in the Malaysian palm oil criteria agreement on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had said they were not able to prepare agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 suggested an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

Of the overall allocation for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The staying allotments will be offered at market value. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the cost gap in between the palm oil and nonrenewable fuel sources for the general allotment.

BPDPKS, the company in charge of collecting and managing the palm oil funds, approximated in November B40 would need a 68% subsidy increase.

To help finance that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the present 7.5%, but for that to occur, another main policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati