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

Industry individuals seeking phase-in period expect steady intro

Industry faces technical challenges and expense issues

Government funding concerns emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has sustained issues it might suppress worldwide palm oil supplies, looks increasingly likely to be executed slowly, experts said, as industry participants look for a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and may pressure rates even more in 2025.

While the federal government of President Prabowo Subianto has actually said consistently the strategy is on track for full launch in the new year, market watchers say costs and technical challenges are likely to lead to partial application before full adoption across the sprawling archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, stated it needs to modify some of its fuel terminals to mix and save B40, which will be finished during a "shift duration after federal government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without offering information.

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

Hiswana Migas, the fuel sellers' association, did not instantly react to a request for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be executed gradually, and that biodiesel producers are all set to provide the greater blend.

"I have actually validated the readiness with all manufacturers last week," she said.

APROBI, whose members make fatty acid (FAME) from palm oil to be combined with diesel fuel, said the federal government has actually not released allotments for manufacturers to sell to sustain sellers, which it typically has done by this time of the year.

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

The government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary 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 proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.

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

"I think there will be a hold-up, since if it is carried out, the subsidy will increase. Where will (the money) come from?" he said.

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

"The execution may be sluggish and steady in 2025 and probably more fast-paced in 2026," he said.

Prabowo, who took workplace 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)