Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants seeking phase-in duration anticipate progressive intro

Industry faces technical difficulties and cost issues

Government funding problems emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could suppress worldwide palm oil supplies, looks significantly most likely to be carried out gradually, experts said, as industry individuals look for a phase-in duration.

Indonesia, the world’s most significant 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 set off a jump in palm futures and may pressure rates further in 2025.

While the government of President Prabowo Subianto has stated repeatedly the plan is on track for full launch in the new year, industry watchers say costs and technical difficulties are most likely to result in partial implementation before complete adoption across the sprawling archipelago.

Indonesia’s greatest fuel merchant, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and keep B40, which will be completed during a “transition period after federal government develops the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

During a meeting with government authorities and biodiesel manufacturers recently, fuel merchants requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be implemented gradually, which biodiesel producers are all set to provide the greater blend.

“I have verified the preparedness with all producers recently,” she said.

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

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

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

FUNDING CHALLENGES

For the federal government, funding the greater blend might also be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses earnings from palm oil export levies, managed by an agency 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 impends.

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

“I think there will be a delay, due to the fact that if it is carried out, the subsidy will increase. Where will (the money) come from?” he said.

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

“The application may be slow and steady in 2025 and most likely more hectic in 2026,” he stated.

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.)