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

Industry participants looking for phase-in period expect steady intro

with technical challenges and cost issues

Government financing concerns emerge due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has fuelled concerns it could suppress international palm oil materials, looks significantly likely to be carried out gradually, experts said, as market individuals look for a phase-in duration.

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

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

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and save B40, which will be completed during a "shift duration after government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a meeting with federal government officials and biodiesel producers recently, fuel sellers requested 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 a request for remark.

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

"I have actually confirmed the readiness with all manufacturers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has not released allocations for producers to offer to sustain retailers, which it normally has done by this time of the year.

"We can't deliver the items without order documents, and purchase order documents are gotten after we get agreements with fuel companies," Gunawan told Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allotments)."

The 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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the higher mix could likewise be an obstacle as palm oil now costs around $400 per metric lot more than unrefined oil. 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% boost in aids 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 impends.

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

"I think there will be a delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he stated.

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

"The application may 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 mandate even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina