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

Industry participants looking for phase-in period expect progressive introduction

Industry deals with technical challenges and cost concerns

Government financing concerns emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained concerns it could suppress worldwide palm oil materials, looks significantly most likely to be executed gradually, experts stated, as market participants look for a phase-in period.

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

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

Indonesia's greatest fuel seller, state-owned Pertamina, said it needs to customize a few of its fuel terminals to mix and store B40, which will be finished during a "transition period after government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

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

Hiswana Migas, the fuel merchants' association, did not instantly react to an ask for comment.

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

"I have confirmed the preparedness with all manufacturers recently," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not provided for manufacturers to offer to sustain merchants, which it generally has actually done by this time of the year.

"We can't provide the goods without purchase order files, and order documents are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."

The government prepares to allocate 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 likewise be a challenge as palm oil now costs around $400 per metric lot more than crude oil. Indonesia uses profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

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

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

"I think there will be a hold-up, since 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 product consultancy, stated B40 execution would be challenging in 2025.

"The implementation 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 attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina