Biodiesel allotment decree was awaited by market

Indonesia had planned to launch higher biodiesel mix on Jan. 1

Palm oil standard agreement rose 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while providing the industry until the end of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to launch the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia told reporters, including the government was working to increase the necessary to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel producers and fuel retailers will be offered till Feb. 28 to adapt to the B40 mix. She stated the hold-up was since of technical challenges connected to aids for the fuel.

The non-implementation on Jan. 1. had actually caused a 2.6% drop in the Malaysian palm oil criteria agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel producers had said they were unable to prepare contracts for biodiesel circulation without the decree.

The biodiesel allotment for 2025 suggested an increase from 2024's estimated biodiesel usage of 12.98 KL, ministry data showed on Friday.

Of the total allowance for this year, 7.55 million KL is for the general public service obligation (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allocations will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the price space between the palm oil and fossil fuels for the overall allocation.

BPDPKS, the company in charge of collecting and handling the palm oil funds, estimated in November B40 would need a 68% aid boost.

To help finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the current 7.5%, however for that to take place, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati