Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in duration steady intro

Industry faces technical challenges and expense issues

Government financing issues emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has sustained issues it could suppress worldwide palm oil supplies, looks progressively most likely to be carried out slowly, experts said, as market individuals look for a phase-in duration.

Indonesia, the world's greatest manufacturer 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 triggered a dive in palm futures and might push costs further in 2025.

While the government of President Prabowo Subianto has actually 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 lead to partial application before full adoption across the stretching island chain.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and save B40, which will be completed during a "shift period after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with federal government officials and biodiesel manufacturers recently, fuel retailers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not instantly react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be carried out gradually, and that biodiesel manufacturers are ready to provide the greater blend.

"I have actually validated the preparedness with all manufacturers last week," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has actually not issued allocations for producers to sell to sustain sellers, which it normally has actually done by this time of the year.

"We can't perform without order documents, and purchase order documents are gotten after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allocations)."

The federal government prepares to allocate 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, funding the greater mix might likewise be a difficulty as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

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

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

"I believe there will be a delay, because if it is implemented, the aid will increase. Where will (the cash) come from?" he said.

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

"The implementation might be sluggish and steady in 2025 and most likely more hectic in 2026," he said.

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