decree was waited for by market

Indonesia had planned to introduce higher biodiesel mix on Jan. 1

Palm oil standard agreement increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

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 till completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually planned to introduce the obligatory 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 informed reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel sellers will be provided up until Feb. 28 to adapt to the B40 mix. She stated the delay was since of technical difficulties linked 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 recuperated by around 1%.

Fuel sellers and biodiesel manufacturers had said they were unable to draw up contracts for biodiesel circulation without the decree.

The biodiesel allotment for 2025 suggested an increase from 2024's estimated biodiesel usage of 12.98 KL, ministry information revealed on Friday.

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

"The remaining allowances will be sold at market rate. The non-PSO allocation is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the price gap between the palm oil and fossil fuels for the total allotment.

BPDPKS, the firm in charge of collecting and handling the palm oil funds, approximated in November B40 would need a 68% subsidy boost.

To assist finance that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the existing 7.5%, but for that to occur, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)