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

Industry participants seeking phase-in period anticipate gradual intro

Industry faces technical challenges and cost issues

Government financing problems develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it might suppress international palm oil materials, looks progressively most likely to be carried out gradually, experts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's most significant and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a jump in palm futures and may pressure costs further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the brand-new year, industry watchers say expenses and technical challenges are likely to lead to partial implementation before full adoption throughout the sprawling archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and save B40, which will be completed throughout a "transition duration after government develops the mandate", representative Fadjar Djoko Santoso told Reuters, without providing details.

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

Hiswana Migas, the fuel sellers' association, did not right away react to a demand for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, and that biodiesel producers are ready to provide the greater blend.

"I have confirmed the preparedness with all producers last week," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has actually not issued allocations for manufacturers to sell to sustain sellers, which it generally has actually done by this time of the year.

"We can't perform without order files, and purchase order files are obtained after we get contracts with fuel business," Gunawan told Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allowances)."

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

FUNDING CHALLENGES

For the government, funding the greater blend could likewise be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it required a 68% increase in aids 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 looms.

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

"I think there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he stated.

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

"The implementation may be slow and progressive in 2025 and probably more fast-paced in 2026," he stated.

Prabowo, who took workplace 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