Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

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Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

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


Industry participants seeking phase-in duration anticipate progressive intro


Industry deals with technical difficulties and expense issues


Government financing issues arise due to palm oil price disparity


JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually sustained concerns it might curb international palm oil products, looks increasingly most likely to be carried out slowly, experts said, as market participants seek a phase-in period.


Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the necessary 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 press rates even more in 2025.


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


Indonesia's greatest fuel seller, state-owned Pertamina, said it needs to customize some of its fuel terminals to blend and keep B40, which will be completed throughout a "shift period after federal government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without offering details.


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


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


Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, which biodiesel producers are all set to supply the greater blend.


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


APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has actually not provided allocations for manufacturers to offer to fuel sellers, which it typically has done by this time of the year.


"We can't provide the products without purchase order documents, and purchase order files are gotten after we get contracts with fuel business," Gunawan informed Reuters. "Fuel companies can just 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 told Reuters, less than its preliminary price quote of 16 million kilolitres.


FUNDING CHALLENGES


For the government, funding the higher mix might likewise be a challenge as palm oil now costs around $400 per metric lot more than crude oil. Indonesia uses profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.


In November, BPDPKS approximated it required a 68% boost in subsidies 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 object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the market, consisting of palm smallholders.


"I believe there will be a delay, because if it is carried out, the subsidy will increase. Where will (the cash) originate 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 probably more hectic in 2026," he said.


Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to achieve 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.)

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