Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals looking for phase-in duration expect progressive introduction

Industry faces technical difficulties and cost issues

Government financing issues emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has fuelled concerns it might suppress international palm oil products, looks increasingly likely to be implemented gradually, experts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's most significant manufacturer 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 activated a dive in palm futures and may 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, industry watchers say expenses and technical difficulties are most likely to result in partial execution before full adoption throughout the stretching archipelago.

Indonesia's biggest fuel seller, state-owned Pertamina, said it needs to customize some of its fuel terminals to blend and save B40, which will be completed throughout a "shift duration after federal government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

During a conference with federal government officials and biodiesel manufacturers recently, fuel sellers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be carried out slowly, which biodiesel manufacturers are prepared to supply the greater mix.

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

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

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

The government prepares to designate 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 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 utilizes earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% 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 walking impends.

However, the palm oil market would challenge a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, consisting of palm smallholders.

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

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

"The execution might be slow and gradual in 2025 and probably more busy in 2026," he said.

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