Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia firmly insists B40 biodiesel implementation to continue on Jan. 1

Industry participants looking for phase-in duration expect progressive intro

Industry faces technical challenges and cost concerns

Government financing concerns occur due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to broaden its biodiesel required from Jan. 1, which has actually fuelled issues it could suppress global palm oil materials, looks significantly likely to be executed gradually, analysts stated, as industry individuals look for a phase-in duration.

Indonesia, the world’s biggest manufacturer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has actually triggered a dive in palm futures and may press prices even more in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for full launch in the brand-new year, industry watchers say costs and technical obstacles are most likely to result in partial execution before complete adoption across the sprawling archipelago.

Indonesia’s most significant fuel merchant, state-owned Pertamina, said it needs to customize a few of its fuel terminals to blend and keep B40, which will be completed throughout a “shift duration after government develops the mandate”, spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a conference with federal government officials and biodiesel manufacturers last week, fuel merchants requested a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be carried out slowly, and that biodiesel producers are prepared to provide the greater blend.

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

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

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

The federal government prepares to designate 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 greater mix could also be a challenge as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses profits from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike looms.

However, the palm oil market 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 delay, due to the fact that if it is executed, the subsidy will increase. Where will (the cash) originate from?” he said.

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

“The application might be sluggish and gradual in 2025 and most likely 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 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 .)