Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry individuals seeking phase-in duration expect progressive introduction

Industry deals with technical obstacles and expense issues

Government financing concerns emerge due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has sustained concerns it could suppress worldwide palm oil products, looks significantly likely to be carried out gradually, analysts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, plans to raise the obligatory 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 push costs further in 2025.

While the federal government of President Prabowo Subianto has actually said consistently the strategy is on track for full launch in the brand-new year, market watchers say expenses and technical difficulties are most likely to lead to partial application before full adoption across the sprawling archipelago.

Indonesia's greatest 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 during a "transition duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a conference with federal government officials and biodiesel manufacturers last week, fuel retailers requested 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 instantly respond to a request for comment.

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

"I have verified the preparedness with all producers last week," she stated.

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

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

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

FUNDING CHALLENGES

For the government, funding the greater blend could likewise be an obstacle as palm oil now costs around $400 per metric heap more than crude oil. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% boost 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 walking is imminent.

However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the market, consisting of palm smallholders.

"I think there will be a hold-up, since if it is carried out, the aid will increase. Where will (the money) originate from?" he said.

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

"The implementation may be slow and steady in 2025 and most likely more fast-paced in 2026," he stated.

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