Indonesia firmly insists B40 biodiesel application to proceed on Jan. 1

Industry participants seeking phase-in period expect gradual introduction

Industry faces technical difficulties and expense issues

Government financing concerns develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has fuelled issues it might suppress worldwide palm oil products, looks increasingly most likely to be implemented slowly, experts said, as market participants seek a phase-in period.

Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a jump in palm futures and might press prices even more in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the new year, market watchers state expenses and technical obstacles are most likely to lead to partial implementation before complete adoption throughout the stretching archipelago.

Indonesia's greatest fuel merchant, state-owned Pertamina, said it requires to modify some of its fuel terminals to mix and store B40, which will be completed throughout a "transition period after government develops the required", representative Fadjar Djoko Santoso told Reuters, without providing details.

During a conference with government authorities and biodiesel manufacturers last week, fuel sellers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, told Reuters.

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be carried out slowly, and that biodiesel producers are prepared to supply the greater mix.

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not issued allowances for to sell to sustain retailers, which it typically has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, funding the higher mix could also be an obstacle as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking impends.

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

"I think there will be a hold-up, due to the fact that 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, said B40 execution would be challenging in 2025.

"The implementation might be sluggish and progressive in 2025 and probably more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required 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