Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry individuals seeking phase-in period anticipate gradual intro

Industry deals with technical challenges and cost concerns

Government financing concerns develop due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it could curb worldwide palm oil supplies, looks significantly likely to be executed gradually, experts stated, as industry participants look for a phase-in duration.

Indonesia, the world’s biggest manufacturer 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 set off a jump in palm futures and may press costs even more in 2025.

While the federal government of President Prabowo has actually stated repeatedly the strategy is on track for full launch in the new year, market watchers say costs and technical difficulties are most likely to result in partial execution before full adoption throughout the stretching island chain.

Indonesia’s most significant fuel merchant, state-owned Pertamina, said it needs to customize some of its fuel terminals to mix and save B40, which will be finished throughout a “transition duration after federal government establishes the required”, spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with government officials and biodiesel producers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel retailers’ association, did not instantly respond to a request for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be carried out slowly, which biodiesel producers are ready to provide the higher blend.

“I have validated the readiness with all producers recently,” she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the federal government has actually not released allowances for producers to sell to fuel retailers, which it generally has actually done by this time of the year.

“We can’t deliver the items without purchase order files, and order documents are acquired after we get agreements with fuel business,” Gunawan informed Reuters. “Fuel business can just sign contracts after the ministerial decree (on biodiesel allocations).”

The government plans to assign 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 kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix could also be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

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

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.

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

Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, said B40 implementation would be challenging in 2025.

“The application might be slow and progressive in 2025 and probably more hectic in 2026,” he said.

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