Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in duration anticipate gradual intro

Industry deals with technical difficulties and expense issues

Government financing problems emerge due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually sustained issues it could curb worldwide palm oil products, looks significantly likely to be implemented slowly, analysts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's most significant manufacturer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and may press costs even more in 2025.

While the government of President Prabowo Subianto has stated repeatedly the plan is on track for complete launch in the brand-new year, industry watchers say costs and technical challenges are most likely to lead to partial implementation before complete adoption across the stretching island chain.

Indonesia's greatest fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to blend and store B40, which will be completed during a "shift duration after government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without offering information.

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

Hiswana Migas, the fuel sellers' association, did not right away react to a request for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be implemented slowly, and that biodiesel producers are prepared to supply the higher blend.

"I have actually confirmed the preparedness with all producers recently," she stated.

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

"We can't perform without purchase order files, and order files are acquired after we get contracts with fuel business," Gunawan told Reuters. "Fuel companies can only sign contracts 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, funding the greater blend could also be a difficulty as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes earnings from palm oil export levies, managed by an agency 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, fuelling market speculation that a levy walking is imminent.

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior analyst 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 executed, the aid will increase. Where will (the money) originate from?" he stated.

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

"The application may be sluggish and progressive in 2025 and probably more hectic in 2026," he stated.

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