Biodiesel allocation decree was awaited by market

Indonesia had actually prepared to introduce higher biodiesel mix on Jan. 1

Palm oil standard contract rose 1% after previous fall

Government aims for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while providing the market up until the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually prepared to the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has been signed," the minister Bahlil Lahadalia told reporters, adding the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel sellers will be given till Feb. 28 to adapt to the B40 mix. She said the delay was because of technical difficulties connected to subsidies for the fuel.

The non-implementation on Jan. 1. had actually resulted in a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had said they were not able to draw up contracts for biodiesel circulation without the decree.

The biodiesel allowance for 2025 indicated an increase from 2024's estimated biodiesel intake of 12.98 KL, ministry data revealed on Friday.

Of the overall allocation for this year, 7.55 million KL is for the general public service responsibility (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The staying allowances will be cost market rate. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the rate space in between the palm oil and fossil fuels for the general allocation.

BPDPKS, the agency in charge of collecting and handling the palm oil funds, estimated in November B40 would need a 68% subsidy increase.

To help finance that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however for that to occur, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati