Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry participants seeking phase-in duration anticipate gradual introduction

Industry deals with technical difficulties and expense concerns

Government financing concerns arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it could curb international palm oil supplies, looks progressively most likely to be executed slowly, experts stated, as market participants seek a phase-in period.

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 set off a dive in palm futures and may push prices even more in 2025.

While the government of President Prabowo Subianto has actually said consistently the strategy is on track for full launch in the new year, industry watchers state costs and technical obstacles are likely to result in partial application before complete adoption across the stretching archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and save B40, which will be finished during a "shift duration after government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.

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

Hiswana Migas, the fuel retailers' association, did not right away react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be executed gradually, and that biodiesel producers are ready to provide the higher mix.

"I have verified the readiness with all manufacturers recently," she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has not issued allowances for producers to offer to fuel retailers, which it typically has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the higher mix might likewise be an obstacle as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses profits from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

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

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

"I believe there will be a delay, because if it is executed, the aid will increase. Where will (the cash) come from?" he stated.

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

"The implementation may be slow and progressive in 2025 and probably more busy in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further 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