Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in period expect gradual introduction

Industry deals with technical obstacles and cost concerns

Government funding concerns develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to broaden its biodiesel mandate from Jan. 1, which has sustained concerns it could curb international palm oil materials, looks progressively most likely to be executed gradually, experts said, as market participants look for a phase-in duration.

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

While the government of President Prabowo Subianto has said repeatedly the strategy is on track for full launch in the brand-new year, industry watchers say expenses and technical obstacles are likely to result in partial application before full adoption throughout the sprawling archipelago.

Indonesia’s biggest fuel merchant, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and store B40, which will be finished during a “transition period after federal government establishes the required”, spokesperson Fadjar Djoko Santoso told Reuters, without offering information.

During a meeting with government officials and biodiesel producers last week, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who in participation, informed Reuters.

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be executed gradually, which biodiesel manufacturers are ready to supply the greater blend.

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

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

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

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

FUNDING CHALLENGES

For the federal government, funding the higher 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, handled 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, fuelling market speculation that a levy hike is imminent.

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

“I think there will be a delay, because if it is carried out, the aid will increase. Where will (the cash) originate from?” he stated.

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

“The implementation may be sluggish and steady in 2025 and probably more hectic 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 attain 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.)