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

Industry individuals looking for phase-in steady intro

Industry faces technical challenges and cost concerns

Government financing problems develop due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it might suppress international palm oil materials, looks significantly likely to be carried out slowly, experts said, as industry individuals look for a phase-in period.

Indonesia, the world’s biggest manufacturer and exporter of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and might pressure rates further in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the strategy is on track for complete launch in the new year, market watchers say expenses and technical difficulties are likely to result in partial application before full adoption throughout the sprawling archipelago.

Indonesia’s greatest fuel merchant, state-owned Pertamina, stated it requires to customize some of its fuel terminals to mix and store B40, which will be finished throughout a “transition duration after federal government develops the mandate”, spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with federal government officials and biodiesel producers recently, fuel sellers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, told Reuters.

Hiswana Migas, the fuel retailers’ association, did not right away react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be carried out slowly, and that biodiesel manufacturers are prepared to supply the higher mix.

“I have validated the preparedness with all producers 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 issued allocations for producers to offer to fuel merchants, which it generally has actually done by this time of the year.

“We can’t provide the goods without order files, and purchase order files are gotten after we get contracts with fuel business,” Gunawan told Reuters. “Fuel companies can only sign contracts after the ministerial decree (on biodiesel allocations).”

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

FUNDING CHALLENGES

For the government, moneying the greater mix could also be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% boost 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 market would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the market, including palm smallholders.

“I think there will be a hold-up, due to the fact that if it is implemented, the subsidy will increase. Where will (the cash) originate from?” he said.

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

“The application may be sluggish and steady in 2025 and probably more fast-paced in 2026,” he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more 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