Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants seeking phase-in period expect gradual intro

Industry deals with technical challenges and expense issues

Government financing concerns arise due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it could suppress global palm oil supplies, looks significantly likely to be executed slowly, experts said, as industry participants seek a phase-in period.

Indonesia, the world’s biggest producer and exporter of palm oil, to raise the compulsory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has activated a jump in palm futures and may pressure prices even more in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for complete launch in the new year, industry watchers state costs and technical difficulties are likely to lead to partial application before complete adoption throughout the sprawling island chain.

Indonesia’s greatest fuel merchant, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and store B40, which will be finished throughout a “shift duration after government establishes the mandate”, spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

During a conference with government authorities and biodiesel producers last week, fuel sellers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.

Hiswana Migas, the fuel merchants’ association, did not instantly react to a demand for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be carried out slowly, which biodiesel manufacturers are prepared to provide the greater mix.

“I have validated the readiness with all producers recently,” she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the federal government has actually not provided allowances for producers to sell to sustain retailers, which it generally has done by this time of the year.

“We can’t deliver the products without purchase order documents, and purchase order documents are obtained after we get contracts with fuel business,” Gunawan told Reuters. “Fuel companies can only sign agreements after the ministerial decree (on biodiesel allocations).”

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

FUNDING CHALLENGES

For the government, moneying the greater blend could also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses profits from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated 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 hike impends.

However, the palm oil industry would challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, including palm smallholders.

“I believe there will be a hold-up, since if it is carried out, the aid will increase. Where will (the cash) come from?” he said.

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

“The implementation may be slow and progressive in 2025 and most likely more fast-paced in 2026,” he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more to B50 or B60 to accomplish 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.)