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

Industry participants looking for phase-in period expect progressive intro

Industry faces technical difficulties and cost issues

Government financing issues occur due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually fuelled issues it might curb worldwide palm oil products, looks progressively likely to be carried out slowly, experts said, as market individuals look for a phase-in period.

Indonesia, the world's greatest manufacturer and exporter of palm oil, plans to raise the obligatory mix of palm oil in 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 said consistently the plan is on track for complete launch in the brand-new year, market watchers say costs and technical challenges are likely to result in partial application before complete adoption across the sprawling archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to customize some of its fuel terminals to blend and keep B40, which will be completed throughout a "shift duration after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without providing details.

During a meeting with federal government officials and biodiesel producers recently, fuel retailers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not right away react to a demand for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out slowly, which biodiesel manufacturers are ready to provide the greater mix.

"I have actually confirmed the preparedness with all manufacturers last week," she stated.

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

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

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend might also be a challenge as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses earnings from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

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

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

"I think there will be a hold-up, because if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he said.

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

"The execution might be sluggish and gradual 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 required even more 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.)