Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry individuals looking for phase-in duration expect steady introduction

Industry deals with technical obstacles and cost issues

Government funding concerns develop due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to broaden its biodiesel mandate from Jan. 1, which has sustained issues it could suppress global palm oil products, looks significantly likely to be executed gradually, analysts stated, as industry individuals look for 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 triggered a jump in palm futures and may press costs further in 2025.

While the government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for full launch in the brand-new year, market watchers state costs and technical obstacles are likely to result in partial execution before complete adoption throughout the sprawling island chain.

Indonesia’s biggest fuel retailer, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and store B40, which will be completed throughout a « shift period after federal government establishes the required », representative Fadjar Djoko Santoso told Reuters, without offering details.

During a conference with government authorities and biodiesel producers recently, fuel merchants requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.

Hiswana Migas, the fuel merchants’ association, did not right away react to an ask 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 prepared to provide the greater mix.

« I have validated the preparedness with all manufacturers recently, » she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the federal government has actually not issued allotments for manufacturers to offer to sustain sellers, which it normally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, the greater blend could also be a difficulty as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking is imminent.

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

« I believe there will be a delay, due to the fact that if it is carried out, the subsidy will increase. Where will (the money) come from? » he stated.

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

« The implementation may be sluggish and steady in 2025 and probably more busy in 2026, » he stated.

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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)