Biodiesel allowance decree was awaited by market

Indonesia had actually planned to launch greater biodiesel mix on Jan. 1

Palm oil benchmark contract rose 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the up until the end of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to launch the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has been signed," the minister Bahlil Lahadalia told reporters, adding the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel sellers will be offered up until Feb. 28 to adapt to the B40 mix. She stated the delay was because of technical obstacles linked to subsidies for the fuel.

The non-implementation on Jan. 1. had caused a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel sellers and biodiesel manufacturers had stated they were unable to draw up agreements for biodiesel distribution without the decree.

The biodiesel allocation for 2025 indicated an increase from 2024's estimated biodiesel intake of 12.98 KL, ministry information revealed on Friday.

Of the total allocation for this year, 7.55 million KL is for the general public service obligation (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the country's palm oil fund.

"The remaining allocations will be offered at market cost. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the rate gap in between the palm oil and fossil fuels for the total allowance.

BPDPKS, the firm in charge of collecting and managing the palm oil funds, approximated in November B40 would require a 68% subsidy increase.

To assist fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however for that to occur, another official regulation is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)