Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry participants seeking phase-in duration anticipate progressive intro

Industry faces technical difficulties and cost concerns

Government funding concerns occur due to palm oil price variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled issues it could suppress worldwide palm oil materials, looks likely to be implemented gradually, experts stated, as industry individuals seek a phase-in duration.

Indonesia, the world’s most significant manufacturer 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 triggered a dive in palm futures and might pressure rates even more in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the strategy is on track for complete launch in the new year, industry watchers state costs and technical challenges are likely to result in partial implementation before full adoption across the sprawling island chain.

Indonesia’s most significant fuel seller, state-owned Pertamina, stated it needs to modify some of its fuel terminals to blend and keep B40, which will be finished throughout a “transition duration after federal government develops the required”, representative Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with federal government officials and biodiesel manufacturers last week, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, informed Reuters.

Hiswana Migas, the fuel merchants’ association, did not immediately react to a request for comment.

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

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has actually not released allotments for producers to sell to fuel retailers, which it normally has actually done by this time of the year.

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

The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the greater blend could also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% increase 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 is imminent.

However, the palm oil industry would object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, including palm smallholders.

“I think there will be a delay, since if it is executed, the aid will increase. Where will (the cash) come from?” he stated.

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

“The execution might be slow 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 further 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.)