Indonesia firmly insists B40 biodiesel application to proceed on Jan. 1

Industry individuals seeking phase-in duration expect gradual introduction

Industry faces technical obstacles and expense concerns

Government funding problems develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to expand its biodiesel required from Jan. 1, which has fuelled issues it might suppress global palm oil products, looks progressively likely to be executed gradually, analysts said, as industry participants seek a phase-in period.

Indonesia, the world’s biggest manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and may press prices even more 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 say expenses and technical obstacles are likely to result in partial implementation before full adoption throughout the stretching island chain.

Indonesia’s most significant fuel merchant, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and store B40, which will be finished during a “transition duration after federal government develops the required”, spokesperson Fadjar Djoko Santoso told Reuters, without offering information.

During a conference with federal government officials and biodiesel manufacturers last week, fuel merchants asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, informed Reuters.

Hiswana Migas, the fuel sellers’ association, did not right away react to a demand for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be executed slowly, and that biodiesel producers are ready to supply the higher mix.

“I have actually confirmed the preparedness with all producers recently,” she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the federal government has not issued allowances for manufacturers to sell to sustain retailers, which it usually has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend might likewise be a challenge as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a company 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 estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.

However, the palm oil industry would object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

“I think there will be a hold-up, due to the fact that if it is executed, the aid will increase. Where will (the cash) come from?” he said.

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

“The application may be sluggish and gradual in 2025 and most likely more busy in 2026,” he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to attain energy self-sufficiency and cut $20 billion of annual fuel . ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina