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

Industry participants looking for phase-in duration expect gradual intro

Industry faces technical obstacles and expense issues

Government financing problems emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has fuelled concerns it could curb international palm oil products, looks increasingly likely to be carried out slowly, experts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's greatest producer 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 activated a jump in palm futures and may pressure rates even more in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the new year, industry watchers state expenses and technical obstacles are most likely to lead to partial execution before full adoption across the stretching archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to blend and keep B40, which will be completed during a "shift duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

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

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented slowly, which biodiesel manufacturers are ready to provide the greater mix.

"I have validated the preparedness 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 federal government has not released allowances for manufacturers to sell to sustain merchants, which it generally has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, funding the greater blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses profits from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% increase 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 hike impends.

However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the market, including palm smallholders.

"I think there will be a hold-up, since if it is executed, the aid will increase. Where will (the money) come from?" he said.

Nagaraj Meda, handling director of Transgraph Consulting, a consultancy, stated B40 execution would be challenging in 2025.

"The application might be sluggish and progressive in 2025 and most likely more busy in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina