Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry individuals seeking phase-in duration expect progressive intro

Industry faces technical difficulties and cost concerns

Government funding issues occur due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could curb global palm oil supplies, looks increasingly most likely to be executed slowly, analysts stated, as industry individuals look for a phase-in period.

Indonesia, the world’s most significant producer and exporter of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has actually activated a dive in palm futures and may push prices even more in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the plan is on track for complete launch in the new year, industry watchers say expenses and technical obstacles are most likely to result in partial application before full adoption across the stretching archipelago.

Indonesia’s most significant fuel retailer, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and keep B40, which will be finished throughout a “transition duration after federal government develops the mandate”, spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

During a conference with government officials 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, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented slowly, which biodiesel manufacturers are prepared to supply the higher mix.

“I have validated the readiness with all producers recently,” she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the federal government has not released allowances for producers to sell to fuel retailers, which it normally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the higher blend might also be a difficulty as palm oil now costs around $400 per metric ton more than crude oil. Indonesia utilizes profits 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, fuelling market speculation that a levy walking looms.

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

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

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

“The execution might be slow and steady in 2025 and most likely more busy in 2026,” he stated.

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